Panama: reforms on pension system
In March, Panama's National Assembly approved Law 462, introducing significant changes to the country's Social Security system. This reform has sparked a broad national debate and includes key adjustments to the pension system, employee and employer contributions, and new provisions applicable to workers.
Pension reform proposal
According to the government, the changes are essential to ensure the financial sustainability of the Social Security Fund (CSS). Key measures include:
- Retirement age: no changes. It remains at 62 for men and 57 for women. A review will take place in six years to determine if an adjustment is needed.
- End of the solidarity system: the previous system, where contributions were pooled, is being replaced by individual savings accounts. Each worker will now save for their own retirement.
- Consolidation of pension funds: all funds will be merged into a unified structure, ensuring that individual contributions are respected. This also aims to rescue the IVM (Disability, Old Age, and Death) fund.
- Minimum pension: a minimum of 60% of the reference salary is guaranteed.
- Fund management: 90% of the pension funds will be managed by Banco Nacional and Caja de Ahorros.
- Inclusion of self-employed workers: a flexible contribution scheme will be introduced for independent workers.
- Gradual increase in employer contributions: these will rise progressively to reach 15.25% by 2029.
- Voluntary savings options: affiliates will have the option to make additional contributions to enhance their future pensions.
Individuals currently enrolled in previous pension schemes will be allowed to voluntarily switch to the new system during the first year. As of March 2036, the transition will become automatic for those under the mixed system.
Conclusions
It is recommended that financial directors closely monitor this development, especially those with operations in Panama or employees affiliated with the CSS. These changes may impact labor costs and employee benefit planning.
Given these changes in Panama's pension system, do not hesitate to contact us for efficient and convenient payroll management for your multinational or investment fund.
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All information contained in this publication is up to date on 2024. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.
