In-depth study of the BN proposes a special contribution to pensioners and lower it to employees

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The most recent actuarial study made to the workers’ pension fund of the National Bank (BN) recommended creating a special contribution for retirees of the system and reducing the contribution of current workers of the public entity.

The measure was proposed as an option to close the “intergenerational inequity” of the regime because the 5,169 employees of the institution subsidize the monthly benefit paid to the 1,586 pensioners, who do not make contributions to the system.

The report, from last February, pointed out that retirees only contributed 44% of the money they receive each month. While the current workers contribute above their future pension, that is, for every ¢100 that will be granted to them in pension, they will have contributed ¢160.

“Once again it is pointed out that the profile of benefits with respect to the profile of requirements, in the future, does not maintain the relationship that there must be a balance between what is contributed and what is granted, a situation that must be considered with the purpose of making the adjustments that allow reaching a fair, equitable and actuarially stable Fund”, details the actuarial study made to the Guarantee and Retirement Fund of the Employees of the National Bank.

To correct inequality, the study by actuary Luis Guillermo Fernández recommended analyzing the possibility that retirees, as of December 2020, make a staggered contribution to the system according to their benefit amount; but that the minimum pension of ¢250,000 remains exempt.

The report did not provide any specific proposal as to how much the contribution percentage of retirees should be. Currently, 1,126 people, that is, 70% of retirees, have a pension that does not exceed ¢1 million a month. While 366 retirees receive more than ¢1 million and up to ¢4.5 million per month. In addition to these amounts, they receive the pension from the Disability, Old Age and Death (IVM) regime.

“Maintaining the actuarial balance of the Fund, it is proposed that the worker’s contribution be reduced in annual percentages, until reaching a reasonable, proportionate, fair and equitable intergenerational gap closure,” the study underlines.

Current BN employees contribute, monthly, the equivalent of 6% of their salary to the regime, although the amount will rise to 7% in 2026.

The Bank quotes the equivalent of 10% of the payroll, an amount that amounted to ¢10,227 million during the past year, according to the financial statements of the system.

Carlos Chavarría, general manager of the Pension Fund, said that they are currently working on a proposal to reform the regime, based on the latest study, which will be presented to the Bank’s Board of Directors. However, he did not specify whether the initiative will recommend creating the solidarity contribution to pensioners or lowering the contribution of current workers.

“According to the actuarial result, as of December 31, 2021, it could be feasible to reduce said contribution (to employees), but this will depend on the assessment made by the Management Body, based on technical criteria, to later be submitted to the final approval of the Bank’s Board of Directors,” said Chavarría.

The recommendation to reduce contributions to current workers was given, mainly, because the actuarial study determined that, at the end of 2021, the Banco Nacional pension system reported a surplus of ¢12,505 million in the closed scenario, that is, without anticipate the incorporation of new contributors.

The result implies a reversal compared to the two previous studies. In 2020, an actuarial deficit of ¢24,292 million was projected and, in 2019, of ¢45,763 million.

The correction was caused by the reform of the IVM fund because the retirement age in the BN is the same as that of the system managed by the Costa Rican Social Security Fund (CCSS). So, the reform approved by the Caja that raised the retirement age for men to 65 years, and for women to 63 years, had a positive effect on the future projections of the public bank system.