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Adjustments to the PAYGO pension system unleash protests leaving some 30 people dead in Nicaragua

23 April, 2018

Adjustments to the PAYGO pension system unleash protests leaving some 30 people dead in Nicaragua

• Joint employer/employee contribution increases from 22.25% to 29.50% of salary.
• 5% reduction in future pensions

After the government announced a series of reforms to avert the bankruptcy of the public pension system on April 16, a series of protests broke out in the country’s main cities. The protests have left a balance of some 30 dead and more than 60 injured to date, in addition to widespread looting all over the country.

The measures proposed by the Government include increasing workers’ contributions to the public PAYGO system from 6.25% to 7% of wages, and employers’ contributions from 19% to 21% as of July 2018. Employers’ contributions will increase to 22.5% as of 2019 (i.e., an increase in the joint contribution rate from 22.25% to 29.5% of wages as of 2019). It has also been proposed that future pensioners will have to contribute 5% of their pensions to the PAYGO fund. Another one of the measures eliminates the current tax ceiling of USD 2,350, with contributors having to contribute on the entire amount of their wages from now on.

The Government justified the measures aimed at averting the bankruptcy of the Social Security Institute. However, given the regrettable acts of violence, on April 22 the Government announced that it will not implement the reforms.

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