22 years have passed since the last time there was a change in the retirement age in Ecuador, the same one that was established in the law of November 2001. Before that date, in the Mandatory Social Security law, other retirement conditions. These days, Ecuador’s urgent task is to discuss the paths that could make the social security system viable, since at the moment it presents an actuarial insolvency problem. One of those paths could be the increase of years to obtain retirement.
This is happening at a time when in France, for example, the main authorities have also suggested that the issue of increasing the retirement age of the French is non-negotiable. This debate is taking place despite the strong citizen protests that are taking place these days in the European country. The current proposal of the government of Emmanuel Macron is the increase from 62 to 64 years by 2030 of the minimum retirement age and the advancement to 2027 of the increase from 42 to 43 years of contribution to be able to enjoy a full pension (until now planned for 2035).
In Ecuador, article 229 of the Social Security Law -which came into force in November 2001- establishes that in order for an insured to retire, they must meet certain conditions:
- Be 60 years old and prove 30 years of impositions. This retiree will receive 75% of the average of the best five years of best salary or contribution salary.
- If the 60-year-old insured has a longer period of deposits at the time of retirement, he will have the right to improve his old-age pension in the percentage indicated in the General Regulations of this Law. The IESS has issued resolutions in which Set this percentage. For example, if a person completes more years of contribution, he can collect a higher percentage of pension. If they were 35 years old, he would receive 81% of the average of the five best salaries.
- The percentage rises as the age of 40 approaches. If the insured has 40 years of contribution, he will be entitled to ordinary old-age retirement with a pension equal to 100% of the average of the five years of the best contribution salary or salary. This without age limit.
- On the other hand, those who are 65 years old can retire with only 15 years of contributions. Obviously the retirement will be less. Thus, with 15 years the percentage received from retirement is 56% of the average of the five best salaries. People who retire at age 70 can do so with just 10 years of contributions. However, the pension to be received will be 50% of the average of the five best salaries.
In the old Mandatory Social Security law, an age of the contributor was not established to receive 75% of the pension, he only had to comply with 30 years of contribution. A working woman could be retired with 300 deposits, that is, with 25 years of contribution.
Going back to the current law, for Fernando Mosquera, a member of the Study Board for Social Security, it would be appropriate at this time that, after two decades, an adjustment be made on the issue of years. Especially since the calculation parameters of life expectancy have been extended. Now demographic and actuarial studies indicate that life expectancy for men is 74 years and for women 78 years, although in practice men live over 75 years and women over 80.
In this sense, remember that in the 2001 law an article was established indicating that the retirement age should be increased according to actuarial studies.
For Mosquera, the increase in age does not require a change in the law, but rather that the IESS Board of Directors take the necessary resolutions in accordance with current law. But he also explains that the reforms should not be taken as measures of shockbut gradually. It indicates, for example, that the IESS Council could make a reform regarding retirement from the age of 60 who currently only receives 75% of the average of the best salaries. It could then be established that in the next five years a year will be increased for this reduced retirement, but with an increase in the percentage of the pension. So, at 61 years old he would receive 80%, at 62 years old 85%, at 63 years old, 90%; with 64 years, 95% and with 65 years they would already reach 100%.
He considers, however, that this government will probably not be able to do it due to the weakness that it now presents. In any case, he says that we must wait for the results of the recently formed Interdisciplinary Commission, headed by Augusto de la Torre, to evaluate their proposals.
Mosquera indicates, however, that the situation of the IESS is complex: “Neither raising the contributions, nor the retirement age, nor recalculating pensions, is a solution for the IESS envisioned in the future.”
Regarding France, Mosquera says that at the moment they would have a higher age for the minimum retirement age (62 to 64 years in 2027 when in Ecuador it is 60 years), but also greater years of contribution to receive a full pension (42 to 43 years in 2027, when in Ecuador at the moment it is 40 years); despite the fact that they have taxes that seek to strengthen the distribution system.
Meanwhile, Henry Llanes, representative of the Association of Affiliates, Retirees and Pensioners of the IESS, when asked if now, when 22 years have passed since the last reform, would be a good time for a new age reform, considers no, because first you have to put the house in order. That is, solve the problems that the IESS has in the financial area, and then see the corrective measures. According to Llanes, the proposal would be for the IESS to meet the health and pension needs of its affiliates and that the health care of those who are not affiliated: children of affiliates up to 18 years of age, people with catastrophic illnesses, housewives, people with disabilities , are attended by the Ministry of Health.
He assures that although health and pensions are in different funds and in theory one should not affect the other, in practice it has been affected. On the one hand, for some years unfortunately as a result of the reform in the contribution rates made by Richard Espinosa, during the government of Rafael Correa, part of the contribution to pensions was stopped, to deliver those resources to health. This no longer happens, but the contributions that the Government must give to pensions have stopped being paid and something has begun to be paid to Health. The pension fund ends up being affected, either way.
In any case, although the care of retirees according to the law must be financed by the State, regarding this group of people, Llanes says that they should continue to be cared for by the IESS and the State continue to finance said care.
And in the future, the Rural Social Security should become independent with its own law, he comments.
- In 2023 it is estimated that the IESS will pay $5.4 billion annually for pensions. The affiliates’ contributions represent $2,200 million, while the State provides some $2,000 million for the 40% contribution.
- The balance of $1,200 million comes from the pension fund, which is becoming increasingly decapitalized.
- The amount of pensions is growing year by year significantly. In 2022, $4.950 million were paid in pensions and in 2021 $4.650 million. (YO)
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