The President of the IESS, Francisco Cepeda, reported that the Board of Directors of the entity will analyze several scenarios and will cross four variables, to generate a proposal that allows the IESS to have greater sustainability in its pension fund.
Those variables would be: retirement age, years of contributions to the IESS, recalculation of the formula for pensions and the calculation of the State contribution to the IESS, which would now be based on a percentage of GDP. The statements were made in an interview with Teleamazonas this morning.
The modifications are necessary, as there are several factors that threaten the sustainability of the Fund. The first is that the life expectancy of people worldwide has risen. In the case of Ecuador, life expectancy has increased ten years compared to 1985 with 2015. Then the contributions delivered by the affiliates are not enough to cover all the years of pension payments. This creates an actuarial deficit of $46 billion, he explained.
Additionally, the Fund’s income is less than its expenses. Thus, each year the income is about $2.29 billion, but expenditures reach $4.6 billion, that is, an annual deficit of $2.3 billion is generated. Currently there are only about $5,800 million in the Fund that would be reduced as a result of the deficit.
Meanwhile, the Pension Fund was affected by the decision, during the Correa government, to eliminate the 40% contribution to pensions. This generated a shortfall of $ 5,000 million. Finally, the number of affiliates supporting a retiree is less than necessary. Currently there are 5.72 affiliates for one retiree, and there should be eight for each retiree.
In this sense, now it will be the Board of Directors that seeks solution proposals until the end of February, so that later a firmer proposal could be made at the end of March. Then it will go to the Executive and later to the Assembly. In any case, Cepeda assured that these days they are analyzing the scenario of changing the way of calculating the pension. Currently it takes into account an average of the five best years of contribution, but it could be extended to ten or fifteen years, he said. At the moment they are carrying out a series of financial runs that, if they give positive results, could mean that other reforms are not required.
ratified that there has been no talk of an increase in contributions in the scenarios analyzed.
Source: Eluniverso
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