This week the Constitutional Chamber (Sala IV) in Costa Rica approved the decision of the Government to put a limit of 2.7 million colones (approximately $4500.00 USD) to luxury pensions where some currently reach close to 12 million colones (approx. $20,000.00 USD) gross amount.
“Luxury pensions” are those received by retirees that did not contribute the necessary quotes to receive the amounts they do, for instance receiving a pension equivalent to 100% of the best salary reported or retiring at 50 years of age, privileges that were established under certain regimens particularly in the education sector and others from the Government in the past years.
There are currently 61,000 pensions considered “luxury pensions”, 43,000 from the education regimen and 18,000 from the Government.
This limit will be applied to the pensions that were granted after December 28, 1998 since those approved prior to that date were ruled by a different law approved that year (which established that the limit would be the equivalent amount of 10 times the lowest salary paid in the Public Administration). The Government cannot request the retroactive reimbursement of any amounts paid in the past few years that exceed the new limit established.
Some of the judges disagreed with the decision of maintaining the luxury pensions that were approved prior to December 28, 1998, considering that “everyone should contribute in solidarity to sustain a retirement regimen”; however, the majority ruled. Other exceptions approved will allow a big percentage of retirees to continue perceiving high amounts, for example, those that worked past the date set to be allowed to retire, even if it was just one day.
This measure therefore will represent minimum savings to the Government of not even 0.6% of the total amount that it will have to pay in 2019 and which represents a 23% of the taxes collected.
“Luxury pensions” are those received by retirees that did not contribute the necessary quotes to receive the amounts they do, for instance receiving a pension equivalent to 100% of the best salary reported or retiring at 50 years of age, privileges that were established under certain regimens particularly in the education sector and others from the Government in the past years.
There are currently 61,000 pensions considered “luxury pensions”, 43,000 from the education regimen and 18,000 from the Government.
This limit will be applied to the pensions that were granted after December 28, 1998 since those approved prior to that date were ruled by a different law approved that year (which established that the limit would be the equivalent amount of 10 times the lowest salary paid in the Public Administration). The Government cannot request the retroactive reimbursement of any amounts paid in the past few years that exceed the new limit established.
Some of the judges disagreed with the decision of maintaining the luxury pensions that were approved prior to December 28, 1998, considering that “everyone should contribute in solidarity to sustain a retirement regimen”; however, the majority ruled. Other exceptions approved will allow a big percentage of retirees to continue perceiving high amounts, for example, those that worked past the date set to be allowed to retire, even if it was just one day.
This measure therefore will represent minimum savings to the Government of not even 0.6% of the total amount that it will have to pay in 2019 and which represents a 23% of the taxes collected.
