The current design of the pension system of the Ecuadorian Social Security Institute (IESS), in terms of years of contributions and percentage of pension, is unfair, because it makes it more attractive for citizens to enroll only in the last years and pay contributions at a high salary, to pay contributions for 30 years or 35 years of work. “This design must have been made by a politician,” says the coordinator of the Commission that prepared the reform proposal, Augusto De la Torre, referring to the fact that it was not technically made.

He assures that people have already realized this and now there is a very large belonging curve among people aged 60 and over. And he showed it, during the first presentation of the proposal to civil society, last Wednesday, with a table that shows at what age some citizens start to join and contribute.

The point is that the IESS regulations allow a member to, for example, become a member at the age of 60, contribute for 10 years and retire at the age of 70 with 50% of the pension. The benefit for a person who chooses this path is that by contributing 11.06% of their salary for those few years, they will have a replacement rate of 90% (one of the highest in the world). That is you will get 90% of the best five years.

This is where a kind of legal ‘criolla viveza’ occurs, where the member contributes to a high salary for only five years, knowing that what he will receive will be 50% of that.

This is the case of Tamara, now she has a pension of 1000 dollars. In the first years of her productive life, she did not work formally, but devoted herself to household chores. But when she turned 60, her husband, who owned a company, connected her with which he kept her in a high position for the last five years with a salary of $2,000. Now he receives a pension that allows him to live a peaceful life.

Instead, Lourdes worked at 19 and retired at 65. That’s why he could be more than 40 years old. She also counted for the best five years, and in the end she got 900 dollars.

For Augusto De la Torre it is a very unfair system, but at the same time it has become attractive to many. He even assures that there are foreign retirees who come to the country to spend their retirement years and find out about this type of benefits and become members of IESS. In the end, they receive two pensions, the one from their country where they worked for several decades and the one from Ecuador where they paid for several years.

In this sense, within the framework of the proposed reform of the IESS pension system, it establishes two measures to combat this inequality. On the one hand, contribution years increase semiannually. However, those who start paying contributions at the age of 60 will have to complete at least 15 years of service, that is, they will no longer retire at the age of 70, as they do now, but at the age of 75.

Another measure is to increase the spectrum of prime years, which are now five, so that salaries up to 30 prime years are taken into account. This will happen progressively, increasing each year by one year, so the process would take three decades.

The proposed IESS reform, which is still in the process of being introduced and discussed by the population and the Government itself, proposes three important changes.

The first is that the minimum retirement age, which is 60 years, does not change, but the number of years of service increases from 30 to 35 years. The contribution rate does not rise, but two more months of contributions are calculated each year, since now only 12 are calculated and 14 pensions are paid. The number of best years of salary for determining the pension is increased and the relationship between the retirement age and the percentage received is established, so that the earlier a person retires, the less he receives.

All this in an effort to make the system sustainable over time, because now the risk of pension payments could manifest itself in four or five years.

There are other important issues in the proposal: