Minimum pensions and voluntary contributions will be created in the AFPs

The Congress published a law that allows members of the Private Pension System (SPP) to access a minimum pension and contribute voluntarily to nourish their pension fund in the AFPs, in order to improve your quality of life upon retirement.

Said regulation (Law 31670) It was made official by the Legislative Power after the expiration of the constitutional term that the Government had – including that of Pedro Castillo – to promulgate or observe it.

What does a minimum pension imply?

Each member will be able to set a savings goal for their retirement in their Individual Capitalization Account (CIC). Taking advantage of this is optional for the contributor and in no case deprives him of other benefits existing in the SPP or other current laws.

The pension, however, may not be less than the Basic Consumer Basket (CBC) determined by the INEI: that is, S/378 for one person and S/756 for two, recalls the Superintendence of Banking, Insurance and AFP (SBS); with this, the minimum retirement balance is brought to life.

In addition, once this amount is reached, they will be able to dispose of the surpluses of their individual account; as well as issue negotiable guarantees for an equivalent to the surplus of the CIC for two years from its issuance.

IR return

The minimum balance will be made up of the mandatory contributions –10% of the salary received– and voluntary contributions that the worker has given to his individual account, as well as the profitability generated by his AFP.

In order to promote alternatives for voluntary contributions, it is endorsed to return the fourth and fifth category Income Tax or other tax in favor of the affiliate, for which the Ministry of Economy and Finance is empowered (MEF) broaden the scope of contributors who may require it.

The norm urges the MEF to regulate the law in up to 90 calendar days.

Consequences of disposing of the surplus

According to the law, it seeks to create “a better pension culture” with minimum pensions and voluntary contributions; however, the teacher ESAN Jorge Guillén warns that “it is a lot of paper waste to not solve anything.”

In his opinion, the voluntary contribution is already contemplated in the AFPs, be it for social security or savings purposes; as well as the free disposal of the accumulated surpluses of the CIC.

“This figure already existed. You have an amount in your CIC and no pension purpose, as long as you don’t withdraw it. Both sums are calculated for the pension when added to a fund for the time of retirement ”, he notes.

Guillén maintains that the background of the new law it would not increase the density or the culture of savings in the AFPs because the great problem of the current system is to fight against the prevailing informality in our country.

“The law is not a danger, but it is harmless. Informality is a barrier that prevents this. If we have rigid labor markets, labor cost overruns, we will not be able to solve the problem of informality, and therefore of contributions. People are very wary of the private pension system and apart from that, there is informality. The root problem is not being attacked in order to have decent pensions for everyone”, concludes the economist.

SBS warns that the regulation affects the construction of a pension

The SBS warned a few months ago that this initiative would affect the construction of a pension for affiliates in the long term, since the funds have been weakening with authorized withdrawals.

In general terms, they estimate that between S/16,327 million and S/28,797 million are withdrawn from pension funds for one basket and two basic baskets, respectively.

Putting together the aforementioned withdrawals, the potential output of the AFPs would be S/127,000 million.

In this regard, Giovanna Prialé, president of the AFP Association, considers that the approved law represents “an additional modality and expands the possibilities that the affiliate has to choose how he wants to retire.”