Within the framework of the discussions on the pension reform project held by the government, workers, academia and businessmen, Asofondos He took on the task of putting figures on the last proposal raised at the pension table, that of the workers’ centrals.
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Among the proposals, there is talk of the elimination of the Individual Savings with Solidarity Regime (RAIS); access old age pension at 800; give a basic income (subsidy) for adults over 65 years of age; increase pensions, as well as increase the minimum wage, among others.
For the Association, said initiative, although it aims at a laudable purpose which is to increase the number of people with income for old age, entails a series of extremely costly implications that would generate more problems than solutions.
To begin with, it leaves the aging phenomenon out of the equation, a key factor in any reform analysis, even more so if it is proposed that the system be pay-as-you-go, which, as is known, is based on young people contributing to the most old.
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“Currently there are approximately 4 workers for each older adult, in 30 years they will be less than half, and that means that the resources will be insufficient to pay the allowances of an older population that is larger than the current one,” explains Santiago Montenegro, president of Asofondos.
The unions’ proposal proposes reducing quoted weeks that would cause pension coverage to rise to 35% but leaves out two other essential factors: the equity of the system and, very importantly, its fiscal sustainability.
According to estimates from the Economic Studies area, the pension liability would almost triple, reaching levels of 275% of GDP, this is at today’s values, a sum close to $3.600 trillion, “financial sustainability is called into question and creates a real pension bomb”says Montenegro.
“In a country where 8 out of ten workers do not retire, where an average worker upon reaching pension age only achieves 500 weeks of contributions, it is unacceptable that public resources go to those who have greater privileges,” and the union leader specifies that for example “Today a pension subsidy in the public system can reach up to $1.800 million, with that a life annuity of more than $332,000 could be given to 19 older adults in a state of vulnerability.”
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For Asofondos, the proposal of the workers unions destroys savings. The problem of rapid aging that we are seeing in the country is obvious and, as Montenegro explains, “To face aging it is essential to build savings and this reform proposal raises dissaving. Today the pension savings in the funds is equivalent to 30% of GDP”.
If successful, sooner rather than later there will be no choice but to make adjustments: raise the age, raise contributions, reduce pensions and increase years of contribution.
BRIEFCASE
