On April 27, Congress broadly approved the pension reform bill of law, which among other things increases the minimum retirement age from 60 to 65, in order to contain public pension expenditure.
The key elements of the reform are as follows:
- Increase in the minimum retirement age of workers on several scales ranging from 63 to 65 years of age, depending on the date of birth and the number of years of contribution to date: those born in 1973 will retire at 63 in 2036, those born in 1974 will retire at 64 in 2038 and those born in 1975 will retire at 65 in 2040 (the current retirement age in Uruguay is 60). However, the reform includes two exceptions for not retiring at 65 years of age.
- Due to an “extensive working career,” which affects those who have contributed for 30 years when the law comes into effect, and those who complete 40 years of work.
- Due to working in a “particularly demanding” position, as in the case of construction and farm workers whose jobs involve a high degree of physical exertion. In these cases, they will be able to retire at age 60 with 30 years of contributions.
- Changes to the mixed pension system. Of 15% of the salary that workers contribute to the pension system, 7.5% currently goes to the BPS (Social Security Bank) and 7.5% to the AFAPs (Pension Fund Savings Managers). With this change, 10% will go to the BPS and the remaining 5% to the AFAPs.
- Change in the calculation of the basic salary on which old-age pensions are calculated. As of the reform, the 20 best years will be considered for the equation (instead of the previous formula which considered the best option between the average of the 20 best years and the average of the last 10 years.1). That figure was reached after lengthy negotiations, as the government’s initial proposal was to consider 25 years.
- Inclusion of a mechanism to reduce the Social Security Assistance Tax (IASS).
Endorsed by a Commission of Experts on Social Security, the reform was described as “necessary”and “supportive” by Lacalle Pou, who highlighted its approval as one of the main priorities of his mandate.
Source : https://www.infobae.com/
Date: 28.04.2023
1 In the previous formula, if the last 10 years were more convenient, that value was used with a limit corresponding to the average of the 20 best years plus 5%.
