Controversy in El Salvador over the pension law

According to the data, the government’s proposal to reform the Savings Pension System (SAP) maintains Individual Pension Savings Accounts (CIAP), where affiliated workers saved two-thirds of their contributions.

Just over a year ago, Salvadoran unions proposed to the government a pension distribution system that deposits shareholder contributions into a common fund inconspicuously used for pensioners’ pensions.

According to the economist Cesar Villalona, ​​a priori, the initiative sent to the unicameral parliament will not solve anything.

The proposal promotes two ideas, it will reduce the commission that will be charged by Pension Fund Administrators (AFP), which are private institutions whose sole objective is to manage pension funds according to the method of personal accounts and will increase the employer’s contribution by one point.

There is currently a savings scheme that collects a contribution equal to 15 percent of the corresponding salary: 7.75 percent is contributed by employers and 7.25 percent by workers. The government proposes to increase this contribution to 16 percent, and to increase the employers’ contribution by one point.

The economist says that whoever sees the ideas put forward by the authorities supports them, without even knowing what they contain.

He said that the targets are well defined in favor of plans for the re-election of President Neb Bokel, because next year no one will be able to question the reform that should have just been approved. Villalona expected this to give him good results.

The expert pointed out that it is a reform aimed at providing a conducive environment for the government for the 2024 elections, but that it will involve “fraud in terms of what will be said to the people.” He stressed that as long as the private profit system continues and the state does not contribute, there will be no fair retirement system.

Meanwhile, government spokesmen confirm that the reform raises all pensions, and retirees with minimum pensions will receive 30 percent more, which means that the 90 percent accumulated in this government significantly increases profitability, allowing, according to what they say , with a higher salary.

The AFP would likewise be regulated and monitored, among many other benefits, plan advocates claim.

Controversy arose, and specialists in the matter questioned the financing of the pension increase and the formula and deficit of the Solidarity Guarantee Account, pending knowledge of the government’s proposal.

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