Tuesday, February 23, 2016

Possible pension reform in El Salvador

Pensions for elderly retirees in El Salvador are available only for those workers who had the good fortune to have a job in the government or the formal economy.    But a large percentage of the working population, especially women, works informally in such jobs as domestic workers.   This leaves them vulnerable and entirely dependent on family when they are are no longer able to work.

There is talk, and so far not much more, that El Salvador may reform its public pension system to take greater account of the needs of women.   IPS reports on possible reform in an article titled El Salvador Pension Reform Could Take Women into Account:
People working in the informal sector of the economy, 65 percent of whom are women, do not pay into the system and will have no right to a retirement pension, economist Julia Evelin Martínez, a researcher at the José Simeón Cañas Central American University School of Economy, told IPS..... 
Lawmakers did not create rules enabling people in the informal sector of the economy to be covered by the system, which only applies to formally employed wage-earners.
With contributions by their employers, those covered by the system pay 13 percent of their wages into individual accounts managed by the pension fund administrators (AFPs), which take a 2.2 percent commission and invest the money. 
Since late 2015, the government, the business community, academics and social organisations have been discussing what to do with the pension system which, since it was privatised in 1998, has neither expanded coverage nor improved pensions, as promised. 
According to official figures, as of November 2015, 2.7 million people were enrolled in the pension savings system (SAP), in this country of 6.3 million people with an economically active population (EAP) of 2.8 million. 
But 65.7 percent of the EAP works in the informal sector, while only 24.7 percent actually pays into the system, despite the fact that nearly everyone is formally enrolled, because at some point they registered and their names are still in the system.
Read the rest of the article here.

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