Only three in ten Costa Rican workers have savings for retirement
The majority of Costa Rican workers – a whopping 70 percent – do not have any pension savings or assets to live on upon their retirement, according to a study released by the Costa Rican Banking Association (ABC) last week.
ABC officials said they are concerned with these results because, under Costa Rican law, workers contribute to a mixed pension system. That means that the national pension system depends on both contributions from mandatory salary deductions, and workers’ voluntary pension.
Because Costa Rica’s population is aging, those mandatory deductions from active employees will decrease, increasing the importance of voluntary savings. According to ABC Economic Adviser Ronulfo Jiménez, it is imperative that people save or own assets that can guarantee their economic stability during their retirement years.
Official demographic projections state that the Costa Rican population in 2020 will have 43 retirees for every 100 active workers. The ratio of retirees will rise to 61 per 100 active workers by 2050.
Results are consistent with a recent study from the University of Washington that found that Ticos are improving their life expectancy.
Complementary Pension Operators (OPC) collect and administer pension savings. OPCs are both public and private companies offering voluntary pension savings plans.
Workers can opt to save with the same OPC that administers their mandatory pension funds or select a different one.
Lack of interest
ABC Pensions Specialist José Manuel Arias said people here do not fully understand the importance of having a pension savings plan to compplement their mandatory pension fund.
According to the current pension system, contributions from monthly mandatory salary deductions will allow a worker to receive a pension of approximately 66 percent of his or her salary upon retirement.
Arias explained that if a worker voluntarily saves 5 percent of his monthly salary he would increase his pension fund by approximately 19 percent of his final salary. This would bring his monthly pension up to 85 percent of his last salary, he said.
The country’s Worker Protection Law states that all contributions to a voluntary pension savings plan are exempt from social security deductions and from taxes.
According to the report, however, only 3.7 percent of people over 18 have a voluntary pension savings plan. The lack of savings is particularly high among self-employed workers and homemakers, Jiménez said.
ABC officials indicated that anyone over 15 can sign up for a voluntary pension savings plan, regardless of whether she works or not. Plans are available in U.S. dollars or colones.
“There are no recipes. The only important thing is to start saving at young age in order to enjoy a golden age of comfortable retirement,” Arias said.
You may be interested
U.S. donates $16,000 to help Costa Rica improve environmental reportingThe Tico Times - January 25, 2020
A donation from the U.S. Department of the Interior will help Costa Rica's Environment Ministry (MINAE) receive and track environmental…
In Davos, tourism industry promises less plastic and more sustainabilityPol Costa / AFP and The Tico Times - January 24, 2020
Faced with the tons of disposable plastic used by hotels every year, the CO2 emitted by airplanes or the overcrowding…
Meet Costa Rica’s newest NASA figure: Luis Diego Fonseca FloresBruce Callow - January 24, 2020
Costa Rica may be small, but its people are achieving great things. In this story, contributor Bruce Callow shares an…