Putting into practice the proposals of the union organizations for pension reform in the country would triple the liabilities of the system, reaching a level of 275% of GDP, which is estimated by the Economic Study Area of Asofondos.
“Financial sustainability is being questioned and creating a real pension bomb,” Santiago Montenegro, president of Asofondos, said of the proposal presented as part of the talks on the pension reform project between the government, workers, academia and business people.
One of the unions’ proposals is the abolition of the Individual Savings with Solidarity Regime (RAIS); access to retirement pension after 800 weeks; including providing a basic income (subsidy) for adults over 65 of a minimum wage and increasing pensions.
The Association assures that while the intention to increase the number of people with an income for old age is good, these proposals have costly implications that would create more problems than solutions.
Montenegro said that the phenomenon of aging cannot be ignored, which is a key factor in any reform analysis, especially if it is proposed to change the pay-as-you-go system, which is known to be based on the fact that young people contribute to the elderly .
“Currently, there are about four workers for every older adult, in 30 years that will be less than half, and that means resources will be insufficient to pay the benefits of an aging population larger than the current one,” explained he out. .
The unions’ proposal proposes shortening the quoted weeks which would increase pension coverage to 35%, but ignores two other essential factors: the fairness of the system and its fiscal sustainability.
“In a country where eight out of ten workers do not retire, where an average worker pays only 500 weeks of contributions on reaching retirement age, it is unacceptable that public funds should be spent on those who have more privileges,” said the president of Asofondos. .
“Today, a pension subsidy in the public system can be as high as about $1.8 billion, giving a lifetime annuity of more than $332,000 to 19 older adults in a state of frailty. In a social rule of law, it is unthinkable that it proposes to show solidarity with those who have the most and to sacrifice lower-income workers,” he explained.
As Montenegro explains, “to cope with aging it is essential to build up savings and this reform proposal calls for dissaving.”
For Asofondos, the unions’ proposal destroys savings and does not take into account the problem of rapid aging that the country is facing, and as a result will lead to raising the age, increasing contributions, reducing pensions and prolonging the years of life. of contribution.
As Montenegro explains, “to cope with aging it is essential to build up savings and this reform proposal calls for dissaving.”
Source: El heraldo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
