Early retirement project law
Within the social security regulations, the Dependent and Independent Insured, (hereinafter, Insured) in the managing entities of the Long-Term Social Security, (hereinafter AFP´s) during their working life they are obligated to make monthly monetary contributions in order to have a monthly retirement pension for decent old age, when due to age or health they are unable to work and therefore stop receiving a monthly salary. Those contributions may be mainly used to pay for medical, food and housing expenses.
As a result of the current health crisis caused by Covid-19, which unfortunately triggered an evident social and economic crisis, the purpose of an important group of Policyholders changed and, thanks to the example of neighbor countries, such as Peru and Chile -first countries to approve the early retirement- for more than 1 year the Insured have been mobilized demanding the return of their savings or contributions made to face the aforementioned crisis.
Throughout this period of time, movements of citizens, on January 15th, 2021, after Mr. Luis Alberto Arce Catacora, President of the Plurinational State of Bolivia, through the Ministry of Economy and Finances, presented a Draft Bill for voluntary, exceptional and one-time return of the contributions in a single disbursement. However, on August 4th, Mr. Omar Yujra, president of the Commission for Planning, Economic Policy and Finance of the Chamber of Deputies, declared the beginning of treatment of the Draft Bill “after having achieved a national consensus”.
The amended project law has the following conditions:
– Refund of 15% of their contributions for those Insured who contributed up to Bs. 100,000; and,
-Refund of up to Bs. 15,000 for those Insured who contributed more than Bs. 100,000.
However, Freddy Mamani, President of the Chamber of Deputies reported that contributors who have more than Bs. 100,000 may make a withdrawal of Bs. 15,000.
On the other hand, none of the assembly representatives did not state whether the exclusions regarding the beneficiary Insured and the temporality of the possibility of availing themselves of the benefit, proposed at the time by President Arce, will be maintained, these being the following:
– Those who have accessed or are in the process of acquiring and old-age pension, old-age solidarity, disability, payment of benefit of the Comprehensive Pension System;
– Those who are receiving remuneration from the public or private sector; and,
– Those who have made contributions since December 2019 as dependents of the public sector.
There is also a position against it, people and analysts who affirm that the withdrawal of contributions form the Insured could generate instability in the national financial system, since they assure that about 60% of the Comprehensive Pension System fund is fixed-term deposits in the Bolivian financial system, which generates profits to increase the yield of the contributions and about 45% of the fixed-term deposits come from the AFPs.
Another point discussed refers to the fact that, in the event that the Insured decides to withdraw his or her contributions now, they are putting their future retirement at risk, it could be significantly affected by receiving a lower amount. The foregoing also taking into account that, in recent years, the profitability of the contributions has decreased considerably.
We will be aware to the development regarding the treatment of the law project and its possible modifications, in order to inform you about its promulgation.