Monthly Pension Amount and Comparison with Lawful Collection, along with the Alteration in Buying Power
In late 2020, Argentina enacted Law 27.609, a controversial measure aimed at protecting and improving the purchasing power of retiree incomes [1][2][3]. The law intended to adjust pensions in line with inflation and wage growth, aiming to ensure that retirees’ incomes do not lose value over time.
However, the law has been met with mixed reactions. While the law aimed to counteract income erosion caused by inflation, a significant issue in Argentina, it has been criticised for its negative impact on retirees' incomes. The law, which capped pension increases, was applied in a context of rising inflation and did not consider inflation in its formula [4].
The law, which was vetoed by President Javier Milei, would have increased the $70,000 bonus to $110,000, significantly boosting retirees' income by 7.2% or 16.5% [5]. If the vetoed law had been applied, the minimum income (composed of the minimum pension and the bonus) would have been $446,935 gross or $436,827 net [6].
Despite the law's intentions, several appellate courts across the country have ruled it unconstitutional due to its negative impact on retirees' purchasing power [7]. The Supreme Court of Justice is yet to rule on the matter, but the law's unconstitutionality has been established by several lower courts.
The financing sources for the vetoed law go against the funding of Reciprocal Guarantee Societies, which provide backing for Small and Medium Enterprises (SMEs) to obtain financing [8]. The measures with a direct impact on revenues, including the vetoed pension increase law, would have an annualized cost equivalent to 0.79% to 1.46% of GDP [9].
Under the current mobility system, the minimum pension for August is set at $314,305.37, with a net minimum income of $304,876 [10]. For those with only a minimum pension income, a $70,000 bonus is added, making the total gross income $384,305 and net income $374,876 [11].
The law has had highly negative effects, resulting in a significant deterioration of retirees' incomes. For retirees who did not receive a bonus, the law led to a loss of purchasing power of 50.3% [12]. The law's formula did not compensate for the damages that benefits had previously suffered [13].
In summary, while Law 27.609 aimed to restore or preserve the real value of pension payments through an updated indexation system, its implementation has been criticised for its negative impact on retirees' incomes. The Supreme Court of Justice is yet to rule on the law's constitutionality, but several appellate courts have already declared it unconstitutional.
- The controversially enacted Law 27.609 in Argentina, intended to protect and enhance retiree incomes by adjusting pensions with inflation and wage growth, has been a subject of debate due to its potential negative impact on retirees' incomes.
- The vetoed Law 27.609, which aimed to boost retirees' income by increasing the $70,000 bonus to $110,000, would have significantly improved their financial situation, contrary to its observed negative effect on purchasing power.
