The new pension for retirees that would be applied, if the reform proposed by the Interinstitutional Commission is accepted, would have several components. One of them would be $250 per month for each retiree, which would come from a 40% state contribution. In addition, there will be another item that is calculated in relation to the contributions made during the years of work and finally a savings fund consisting of unemployment, employer’s pension, among others.

This is the new profile of the old age pension proposed for Ecuador, commented this Thursday Pablo Lucio Paredes, a member of the Interinstitutional Commission, who made a new presentation within the process of socialization of the reform. The event took place at the Shakespeare Theater of the University of San Francisco de Quito.

Pablo Lucio Paredes explained first of all that the goal of this new pension organization is the result of the fact that it was requested that the 40% that the state delivers to IESS be transparent and fairer. Yes, it used to happen that the 40% came proportionally more to the one who received the largest pension, and less to the one who received the smallest. On the other hand, by equalizing $250, plus inflation, this item is achieved by allowing those with less to receive a larger pension amount and those with more to receive less, but knowing that they will be able to save better for their old age.

For more than those 250 dollars, the pensioner will receive what is obtained from the calculation of contributions, according to the new conditions. That is 60 years of age and 35 years of contribution (no longer 30 years) and with calculations of the best years that will be extended in time to go from the five best years to the 30 best years. This will complete the adjustment in three decades.

These changes were made due to the fact that the IESS pension system is currently unfeasible, and one of the reasons is that pensioners receive a replacement rate that can be 50% at 70 years of age and 10 years and 100% at 70 years, with 40 years of service . . This is calculated according to the five best years.

The idea is to make the fund more sustainable so that the replacement rate is between 30% and 60%, for the best 30 years, but promoting savings that will supplement the pension.

Pablo Lucio Paredes indicated that no fund can be sustainable if it offers – as is happening now – payouts equivalent to seven or eight times the stake.

Therefore, the IESS curve will change. For example, a middle-income person will get about $600 under the current system, and the same amount under the new system. But instead, a person receiving one of the highest pensions, between $1,100 and $1,500, would fall into the $700 to $1,100 range but be able to accumulate high retirement savings.

Meanwhile, Rodrigo Ibarra, professor at the University of San Francisco and director of Actuary, explained that the demographic issue is a risk in the sustainability of the pension system. Currently, there are about 3 million branches and 700,000 pensioners, that is, there are more or less five branches that support a pensioner. But in the future, this relationship will break down until there are situations like France, where there are 20 million branches but 10 million pensioners (a ratio of two to one, which makes it unsustainable).

According to Ibarra, there are at least seven causes of the IESS crisis: a demographic evolution characterized by a low birth rate, an aging population that is higher than before. The interference of politics in administration and the taking over of resources by governments. The 40% removal did a lot of damage to the background. Now there is only 6 billion dollars left, which is enough for a year and a half of retirement. Additionally, joining the housewives’ affiliation was somewhat demagogic. In addition, actuarial mandates were violated, which indicated that the matter should be reviewed every five years.

He confirmed that the Pension Fund currently receives contributions of $2.4 billion but needs $5 billion, leaving a $2.6 billion gap each year. However, for Ibarra, a more effective issue to improve the system would be to increase the contribution rate.

Meanwhile, the Commission’s proposal has drawn criticism from trade union sectors. This Friday, criticism also came from the representatives of the workers in the Management Council of IESS. Richard Gomez assured himself Teleamazon disagreeing with the proposal and no matter how technical it is, “it does not have the support of sectors that contribute to social security,” he said. He added that the proposal puts the problem on the backs of workers, but says nothing about the responsibility of the state and employers. For Gómez, this proposal means more contributions for the worker and less pensions. In any case, although he said he was against it, he felt it could serve as input for future discussions.

The proposal of the Inter-institutional Commission states that, if approved, the state and IESS must agree on the payment of the pension debt within six months.

Regarding debtors to IESS, on July 14, it became known that this institution issued an official invitation for the employment of a portfolio manager, before the coercion phase.