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6 million independents would be forced to contribute for their old age

6 million independents would be forced to contribute for their old age

With 11 votes in favor and 9 against, the Economy Commission of Congress, chaired by Rosangella Barbarán, yesterday approved her opinion to reform the pension system.

The text —which enjoyed the majority support of legislators from Fuerza Popular and Acción Popular—, as announced by La República, puts an end to the ONP and standardizes the model of individual accumulated capitalization accounts (CICA) of the AFPs.

“Everything is now converted to an AFP. The ONP is a kind of public AFP where everyone will dance with their handkerchief. It is serious that there is no longer a pay-as-you-go system,” said the economist javier olivera.

not everyone can save

The ruling establishes that self-employed workers compulsorily contribute up to 10% when their declared monthly income exceeds 1 UIT. The rate would start at 2% next year and in 2029, it would be 10%. Those who declare up to 1 UIT will give from 1% to 6% in the same period.

Considering official data, there are more than 6.5 million independents nationwide, and only 11.3% contribute to an AFP. Even the text supported by Barbarán warns that 96% of the independents run the risk of not receiving a pension, since eight out of 10 are informal.

Olivera recalls that a decade ago they wanted to force this group to contribute, but —as back then— it is ignored that the poorest are not able to save for their old age despite the fact that everyone has to do so at some point.

At your discretion, the best way to include vulnerable self-employed is to guarantee a universal minimum pension and, as their earning capacity increases, a more efficient pension is built. This would occur with the expansion of programs such as Pensión 65, for example.

Weakens social spending

The reform of the Economic Commission fixes that 3% of the IGV of each purchase is allocated for the old age of the affiliates, who will be able to choose between the companies of the financial system: the ONP or the AFPs for their contributions.

However, Olivera points out that there is a “perverse logic” —agreeing with what was previously warned by the economist Noelia Bernal—, since it only targets those who have the most income, and also takes part of the tax revenues from the Government to finance public services, such as health, education and security.

“A debt is created to the State and it takes away the possibility of social spending. Nowhere in the proposal do they indicate how they will finance the current pensions or those that are to come. A great forate is generated for the public sector,” he concludes.

The employer will continue to not contribute

From the Economy Commission informed La República that the reform —soon to be debated in plenary— does not contemplate a mandatory contribution for employers, unlike the one proposed in the Labor Commission, which sets a rate of 4% (and reduces the burden on the worker to 9%).

“No, employers will not contribute. In contrast, Sigrid’s opinion proposes that employers contribute; however, that would encourage informality,” said the parliamentary source.

Finally, They reiterated that the profitability of the contributors will be respected, and will no longer be penalized in the event of a possible withdrawal of funds.

Infographic - The Republic

Infographic – The Republic

Source: Larepublica

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