Uruguay’s President Luis Lacalle Pou and the Retirement Reform: Key Changes and Implementation Process

2023-08-06 08:29:03
Uruguay’s President Luis Lacalle Pou (EFE/Raul Martinez)

The retirement reform that Luis Lacalle Pou promoted as a flagship goal for his term began to apply in Uruguay, where, among other changes, the retirement age scales from 60 to 65 years and all retirees might choose to maintain a work activity .

Approved on April 27 in Parliament with the votes of the five partners of the coalition formed for the Government of Lacalle Pou, the baptized as “social security reform” was among his promises to fulfill, embodied shortly before the ballot of 2019 in the document “Commitment to the country”.

Raised there as an advance towards “a modern, financially sustainable pension system (…) that takes special care of liabilities with higher levels of vulnerability”, the reform came into force this August as the result of a “virtuous” process.

This, at least, is expressed in a dialogue with the EFE news agency by the president of the Banco de Previsión Social (BPS), Alfredo Cabrera, who stresses that the reform outlined in Law 20,130 is “a very Uruguayan reform.”

“We have defined it that way because it starts from a great previous discussion that had a discussion process first at the level of experts, then at the level of the Executive Power; it was presented to the opposition, it had a great debate before having parliamentary status and then it had a very broad discussion (in Parliament) until it was approved ”, he explains.

According to the former deputy for the ruling National Party, who since 2021 has chaired the autonomous coordinating entity for state social security services, both this debate prelude and the “long transition period” planned for its full implementation, which will be gradual, are in line. with the tradition of a Uruguay whose pension system is extensive.

“Uruguay is a country with a long tradition in social security and a very mature system with very broad coverage. Between the BPS and the other subsystems, coverage for people over 65 years of age is close to 95%, it is very high and it is also a country with an informality rate of 20%, very low for Latin America”, he explains.

Although he points out that “it was not voted for by the entire political system,” since it was rejected by the left-wing opposition coalition Frente Amplio, for Cabrera the reform had a “virtuous” process in which “the government set itself an objective and was fulfilling the steps to get it.

The retirement age ranges from 60 to 65 years and all retirees might choose to maintain a work activity

In a press conference, the Uruguayan Minister of Labor and Social Security, Pablo Mieres, underscored the importance of the numerous changes foreseen in the reform coming into force in August.

One of the key aspects that both Cabrera and Mieres highlighted is the so-called “compatibility between work and retirement”, because although those who retired from the civil fund -for example public officials- might return to work in industry and commerce, the retirees of this last category – the majority in the country – might not do so.

“It was a situation of inequality that we had to correct. (This) means the acquisition of new rights for a very high number of people who are already retired and of workers who, as they retire, will be able to access this right,” emphasized Mieres.

As detailed by Cabrera, now the “flexible partial retirement” applies to dependent workers, which -with the requirements of 65 years and at least 30 years of work- allows them to access retirement and continue working with reduced hours, and for non-dependents the option to continue their activity without contributing or to retire and work if they employ staff.

The lawyer says that this can be beneficial for the system because retirees who already work “informally” will be able to do so formally.

In addition to having the rejection of the FA, the Lacalle Pou reform provoked numerous protests from the country’s trade union center, the PIT-CNT, which is evaluating the feasibility of a plebiscite to nullify it.

Consulted by EFE, the president of the National Organization of Associations of Retirees and Pensioners of Uruguay (ONAJPU), Estela Ovelar, believes that the possibility of retiring and working is not bad if it is “by decision of the person and not by necessity (economic )”.

“If we look at it as a whole, what little good it has is overshadowed by what is not so good. A reform that only increases the working age and in some cases would lower the replacement rate seems insufficient to us, what the person will earn”, he rounds off.

(With information from EFE)

Keep reading:

The Uruguayan Senate approved the pension reform that increases the retirement age to 65 The Uruguayan deputies approved the pension reform project: what it consists of and the steps to follow
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