From today the Common Pension Systemone of the great pillars within the social security reform in Uruguay, approved by the Parliament at the end of April of this year —and regulated by the Executive power in May.
After the first modifications contemplated for the retirement system in Law 20,130 began to be applied in August, the implementation of the new one also begins in December. Common Pension Systemwithin the second stage of application of the reform.
This system seeks to ensure that all workers in Uruguay contribute under similar conditions and, in turn, have the right to retire under equitable conditions as well.
Who enter the labor market from today; those who are already working and starting a new activity in another social security entity also from today; and those who meet the requirements to access the retirement as of January 1, 2043 They make up the group of workers who, automatically and in their entirety, are incorporated into this new integrated pension system.
This means that all Uruguayans included in this group will have the possibility of retiring only at 65 years —as long as they comply with the required 30 years of contribution—; Your basic retirement salary will be calculated based on the best 20 years worked; and they will contribute 10% of their salary to the Social Security Bank (BPS) and another 5% at AFAP.
These changes are added to those that have already been in force since August 1: the compatibility between work and the payment of passive income — which enables retirees to continue working without losing their pension benefits, as long as the work activity is different —; the modifications in survivors’ pensions and in military and police retirement services; the regulation of the solidarity supplement; and the specific modifications of the BPS in the recognition and calculation of work, in the work history and in the special regime of the personnel of consulates, embassies and other international organizations.
In any case, the implementation of the Common Pension System does not imply the disappearance of the previous retirement regime, but rather that many workers will retire within that pension system, while many others will be part of the gradual convergence between regimes. In this transition, the key point will be the gradual increase in the retirement age.
The “forty-somethings”, a point of uncertainty
One of the most controversial age groups in terms of the application of the social security reform are the “forty-somethings”, workers who are currently between 40 and 49 years old and who, in the process of convergence between pension systems, could see their retirements negatively affected after the removal of incentives for those who are voluntarily affiliated with an AFAP.
In this sense, the BPS promoted a free advice system so that each of these workers could consult and plan their retirement based on the changes that will be implemented in the coming years. However, yesterday the deadline to reserve this advisory space expired, and so only 70,000 of the 300,000 people contemplated in this group made use of the tool.
These people have the possibility of passing the all of your pension savings to the BPS —an alternative that, within the Common Pension System, is no longer contemplated since it requires a 5% contribution to the AFAP— or, on the contrary, remaining in the mixed regime but without the incentives contemplated in the previous reform of ’96, which will be progressively eliminated starting in 2033.
Source: Ambito
