El Salvador's Congress approves pension system reforms

El Salvador's President Nayib Bukele takes part in a decoration ceremony in San Salvador
El Salvador's President Nayib Bukele speaks during a decoration ceremony to the Apostolic Nuncio to El Salvador Santo Gandemi, in San Salvador, El Salvador, October 26, 2022. REUTERS/Jose Cabezas

SAN SALVADOR, Dec 20 (Reuters) - El Salvador's Congress on Tuesday approved reforms to increase pensions and create a state entity to supervise the retirement income system, despite criticism from experts who argued the measures were insufficient.

Among the reforms, proposed by President Nayib Bukele, are a 30% rise in pensions and a cap of $3,000 a month.

The minimum will rise to $400 a month from $304, according to a government statement that noted that 100,000 people past working age had not left their jobs due to the inadequacy of pensions. El Salvador's population is 6.7 million.

Congress also endorsed the creation of the Salvadoran Pension Institute, a state entity that will oversee the pension system and private funds.

The changes, approved by the congress with a pro-government majority, will take effect in January 2023 for all workers affiliated with the pension system.

The reforms "do not provide a comprehensive response to the structural problems of the pension system in terms of coverage, sufficiency, equity and sustainability," said Ricardo Castaneda, economist at the Institute for Fiscal Studies, a private think tank.

Lawmakers also abolished a trust with which the government could use workers' contributions to pay government employees who were part of a different scheme.

The pension system in El Salvador has operated privately since 1998.

Reporting by Nelson Renteria; Editing by Tom Hogue and Bradley Perrett

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