A fragile situation that drags on Ecuadorian Social Security Institute (IESS) for years and that threatens it financial viability system, according to actuarial studies, has forced many members to think about whether they will be able to collect their pension when it comes time to retire.
It currently has 3,747,546 members and 619,308 pensioners and retirees. There are six members for every pensioner. Before, the relationship was different, there were several branches for each pensioner. But over time, pensions grew at a faster rate compared to the income of insurance payers, due to The job is lost. By 2018, eight branches covered one retiree, according to actuarial studies from December 2019.
With that uncertainty, a plus economic stagnation of the countryElizabeth Cruz, a 31-year-old contributing employee for five years, started Look for other ways to save money for your retirement. He would like to retire before the age of 60 and devote himself to traveling, but he knows that with Social Security he will not be able to do that then because he would lack the time to contribute and the years.
IESS members retire between the ages of 53 and 73, depending on age, disability or disability.
For access old age pension in social security, a member can do this without an age limit if he registers 40 years of contributions. Those who are 60 or older and have at least 30 years of service can retire.
In the private sector, not all companies Insurance offers pension, retirement or retirement products. The names may change between companies, but the meaning is the same: generate a savings fund for the medium or long term.
The technical name is life annuity insurance, which are within the branch of individual life insurance, explains Patricio Salas Guzmán, executive secretary of the Ecuadorian Federation of Insurance Companies (Fedeseg).
They differ from time deposits offered by financial institutions, because the insurer’s products include life insurance in the event of the insured’s death. They also differ from Social Security because the maximum amount delivered by IESS as retirement is $2,300while in the private sector it can be significantly higher, depending on how much was saved.
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on the local market there are offers as low as $25 a month for maintaining an individual fund. The contribution quota, as well as the accumulation goal and savings conditions, are determined by each person according to their plans, needs, family and economic situation. The goal can be a pension, but it can also have other purposes that the client wants, such as investing in a business, paying for studies, purchasing a vehicle or real estate.
As if it were a bank account, the client can track the movement of his money, andthe financial return you receive, how the planning will achieve the goal, among other details. In addition, during the course, the user can increase the amount of the fee whenever they want, says Salas.
Also, in some companies long-term loans are approvedtaking into account the time of contribution and the amount of resources collected.
Salas explains that it is best to do acquire a pension fund at an early age, from the beginning of productive life. It’s more appropriate because you will have more time to save, paying a lower monthly or annual fee for contributions, and you can plan for a better income that you will receive at the end.
For example, a person who starts saving at the age of 25 and plans to retire when they turn 50 will have to pass on lower premiums or installments. On the other hand, someone aged 35, who has also set 50 as a goal, will have greater contributions to achieving the goal because he has less time, describes the spokesperson of Fedesego.
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Unlike other countries, in Ecuador there is still a high level of ignorance among the population about these private funds, for that reason still are not more popular nor do I star, recognize Patricio Salas and managers of insurance companies.
According to Fedeseg data, iIn 2022, life insurance reserves amounted to USD 105.9 million, in 2021, 106.2 million dollars were registered, in 2020, 106.4 million dollars, and in 2019, 106.7 million dollars.
Experts admit that it is one of the limitations which the public had until recently was high amount of payment fee.
Víctor Jaramillo, a 36-year-old independent expert, wanted to sign a contract with a private fund a few years ago, but did not do so because the monthly payment was high for your income level. So he just bought health insurance. Now he’s thinking about opening a retirement account again because he saw it costs have decreased.
Juan Carlos Maldonado, commercial manager of alternative channels at insurer BMI, points out that, in fact, earlier fees could range from $200 on average to for many people it was not available.
Bearing in mind this reality, and taking into account the economic situation in the country, changed its strategy to attract more customersincluding other socioeconomic segments, explains Maldonado.
He adds that there is a maximum amount of $11,000 per year that can be paid into the company. This is a measure to prevent possible money laundering, and in accordance with the provisions of the Financial and Economic Analysis Unit (UAFE).
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Although the reception is still weak, as a result of the pandemic increased interest in this type of product, Sonia Vizcaíno, national manager of the Life and Medical Assistance Area at Tecniseguros, stands out.
People who consult or hire the most are generally between the ages of 30 and 35, Most of them are married and have children, so they project their savings on the basis of their families, the leader points out. Singles, on the other hand, plan based on how they want to spend their old age.
It doesn’t happen often that the youngest buy a product, because when they start working, their priorities are usually different, their income is lower, and they don’t think about retirement yet.
Vizcaino explains it Once the save time is up and the goal is reached, The client has the power to withdraw all the collected money, take only a part, ask the insurer to transfer it every month as a pension or continue saving.
Néstor Rodríguez, actuarial expert and partner at Iceberg Actuarial, recommends that before taking out insurance look for information about companies that are in the market, to check their experience, what country they come from and what their approvals are with which they count on covering their clients’ money if an emergency happens to the company in the future.
In addition, Rodríguez suggests that the savings plan should include the possibility of obtaining financing with the same money that is saved.
The Federation of Insurance Companies is currently working on an initiative with the Monetary and Financial Policy and Regulatory Committee, which seeks to promote private savings funds as a more affordable alternative. This is part National Financial Inclusion StrategyPatricio Salas is progressing.
Alia is a professional author and journalist, working at 247 news agency. She writes on various topics from economy news to general interest pieces, providing readers with relevant and informative content. With years of experience, she brings a unique perspective and in-depth analysis to her work.