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Pension fund of the IESS fell to $ 7.298 million until June
Posted On 25 Sep 2018
Ecuadornews:
The pension fund, managed by the Bank of IESS (Biess), reached $ 7,298 million in June 2018. The amount of the fund has been falling since December 2015 when it was $ 9,032 million. One of the reasons for this behavior has been the elimination of the contribution of 40% of the State, which will be redelivered from 2019.
Additionally, as of June 2018, there are 3’661,874 members; however, they only contribute fully to the pension fund 3’083,684.
The difference is the members of the Peasant Insurance and the housewives, who have reduced rates.
The data included in a final IESS report is a sample of a “complex situation” in the Social Security system of Ecuador, but that extends to those of the region in general.
Poor coverage of the population and future sustainability are the most difficult challenges for social security in Latin America and in the country. This, according to two reports issued this year by both the International Labor Organization (ILO) and the Center for Economic and Business Research of the University of the Americas (UDLA).
According to the ILO, at least 145 million working people in Latin America and the Caribbean do not contribute to social security.
Although the contributory coverage to social protection in the pension area increased from 36.6% to 44.6% between 2005 and 2015, still 55% of the employed population does not make any contribution; in the Andean countries, coverage barely reaches 31.4%.
One of the biggest problems is that the issue of informality is growing more and more in the region.
Last week, Augusto de la Torre, a former World Bank official who heads the UDLA Research Center, presented an investigation on the situation.
According to the expert, there is low coverage of social security in the region. Meanwhile, those who do may be receiving benefits, for political rather than technical considerations that threaten the sustainability of the system.
Using the example of Ecuador, De la Torre said that without the 40% the IESS would no longer have to pay pensions in a few more years; and with 40% will have about 20 more years. However, he assured that such payment becomes increasingly difficult to meet due to the growth of affiliates.
Faced with these problems, social security systems are opting for several ways such as extending the retirement age, increasing years of contribution to be able to retire, reducing the percentage of salaries to determine the pension and even has begun to put tax to pensions.
For De la Torre, there may be other options such as creating multipolar systems, in which there is a distribution component with solidarity, but also individual savings.
The ILO recommended not to defer more crucial decisions on design and to invest in spaces for dialogue to reach an intergenerational consensus on realistic “promises” that are made.
Ensuring the sustainability of these systems ensures that the principles of social security are respected and intergenerational solidarity continues to be the main source of social justice, the agency said. (I)
