Unionists, workers and members of social organizations demonstrated this Friday (01/27/2023) against a pension reform approved by El Salvador’s Congress at the end of December 2022, reiterating that the changes “do not allow for a dignified pension” and that “the only beneficiaries “ will continue to be the private managers of the funds.
The group, composed of hundreds of people, mobilized in a so-called black march to the presidential house in San Salvador to present a new proposal to reform six articles of the pension system’s comprehensive law, which was adopted amid doubts by economists for its sustainability.
However, the groups of protesters were unable to reach the Presidency headquarters as agents from the police’s Order Maintenance Unit (UMO) blocked their path. Although a commission managed to deliver the proposal.
According to participants, the law passed “has no working class support because it represents a serious setback in the recognition, exercise and exercise of workers’ rights”, “it will not provide for an adequate pension” and will continue to “only” benefit private pension administrators .
The pension dispute
The new law is part of a package presented by President Nayib Bukele’s government, pledged in September 2021, which leaves resource management to Fund Administrators of Pensions (AFP), despite requests for nationalization by some unions.
The legislation states that for retirees, if the calculation of their minimum pension is more than $390 and less than $400, “the pension payable is $400.” The contribution of workers will be 16% of their salary, up from 15%. Of this, 7.25% comes from the person’s salary and 8.75% is contributed by their employer. For companies, this means an increase of 1%.
The law stipulates that the AFPs receive 1% as a commission for managing the resources. The reform also eliminates the benefit of early withdrawal of 25% of employees’ savings.
The Central American Institute for Fiscal Studies (ICEFI) expressed concern that the law would be passed “hasty” and questioned its sustainability. In his opinion, “the sustainability of increasing the employer’s contribution by one percentage point with a simultaneous general increase in pensions by 30% is uncertain”.
According to the agency, in El Salvador, 8 in 10 older adults “have no access to a pension, and only 1 in 4 people in paid work enroll in the pension system.”
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