The axes of the new pension reform

Employers must also provide

The Presidency of the Council of Ministers (PCM) has a commission in charge of the proposal —to be presented next month— for the reform of the pension system.

César Abanto Revilla, an external member of that working group, announced that the PCM is studying the possibility of restoring the contribution by the employer and even by the State.

It is crucial, in his opinion, de-employment the pension scheme and also include formal and informal workers, starting with different scales and models of contribution because it is not the same to demand a rate from a person who earns the basic to survive than from one who earns S/10,000 per month.

This would go hand in hand with an increase in the contribution rate, which “is not politically popular”, but it has to be done despite how complicated it is.

In addition, he is in favor of raising the retirement age and reducing the assumptions of early retirement, also suppressing the retirement mechanisms that were applied during the health emergency and that now “unravel the blanket” to cover us once the retirement age has reached work.

Said proposals will be analyzed in their respective instances of Congress and would be subject to modifications.

Along these lines, lawyer Álvaro Vidal argues that ILO Convention 102 —already ratified by Peru— establishes that the minimum pension must be 40% of the referential remuneration, but in the Peruvian market it is not met.

The lawyer sees the employer’s contribution as transcendental and that the State guarantee not only savings, but also solidarity distribution, thus abandoning the savings scheme in individual capitalization accounts, “which has not worked internationally or here.”

The AFPs want to continue managing the model

Without the State administering the reformulated pension system, since “it would be a mistake” because it is subject to “political pressure”, according to Giovanna Prialé, president of the AFP Association.

Within his multipillar proposal, he ensures that a performance commission should be established, with which a fixed component would be established for the operating costs of managing the fund, while the variable component would be linked to its profitability, and, if If there are losses, the contributor would not be charged a single sol.

Likewise, they demand that the State have a contributory role to include citizens outside the formality through an equal contribution, allowing everyone to have a universal pension at age 65 that replaces the Pension 65 program, whose scope is currently limited only to more vulnerable.

“For each sol contributed by the affiliate, the State gives an equivalent amount until reaching a minimum pension,” Prialé maintained.

Another of its bets is to return 1% of the IGV that a worker pays for a year, as well as to apply the tax deduction to companies that contribute resources to the retirement fund of those employees with lower incomes. With these premises, the AFPs endorse the establishment of a proportional pension for Peruvians who contribute from 10 years onwards.

Finally, they consider it wise to increase competition in the market with new pension managers by preserving the intangibility of contributions, which will require the ONP to transform towards a system with individual accounts. “We do believe that the public pension system could gradually migrate towards one of individual capitalization,” he concluded.

Universal pension, the cornerstone of the reform

He Reading Committee —made up of specialists of different ideological overtones— agreed that every person born in Peru must automatically register to the integrated pension system, as well as those resident foreigners who require it.

Said universal basic pension would be created as a broader version of Pension 65 and its amount per user will be updated periodically, according to the criteria of the MEF and the autonomous constitutional institution that administers the pensions.

However, the group of people who demonstrate having enough money to make their old age more bearable would be excluded.

Said committee puts on the table two solidarity mechanisms for the delivery of the universal basic pension: via Treasury transfers or with a redistribution within the pension system.

In detail, the direct transfers would be given if the retiree were not able to reach the current minimum pension tranches according to their years of contribution. Here, the State will cover the difference with resources that come from tax collection.

It is committed to a concept of tripartite responsibility for pensions thanks to the contribution of workers, employees and the State.

While the redistributive one considers that 70% of the contributions go to an individual capitalization account (CIC) and 30%, to the collective component, in line with what is recommended by the OECD.

Said contributions to the CIC they will be administered by a manager duly supervised and regulated by the State; and the resources for the collective will integrate a common fund with professional management of their investments through a distribution system or a system of notional accounts.

Listen to retirees to improve the system

In the Labor Commission of the Congress — chaired by Sigrid Bazán — dialogue tables have been formed between technicians and representatives of the workers, retirees and members of the pension system of various labor regimes.

Here a substitute text will be prepared that includes some points already raised previously by the Carmen Omonte commission —in which they proposed that the State manage the funds through a new public body.

For example, the National Confederation of Pensioners of Peru It states that workers’ contributions can be increased, although it should not affect them, which is why the tripartite model financed by the State, employer and employee is vital; however, this reformed system “must be distanced from the governments of the day, but not absent.”

While the Mining Confederation hopes that the law will not continue to be reversed, since in the mining sector, despite restricting outsourcing in essential activities, workers continue without contributing to the pension system and do not have access to pensions or care guaranteed medical.

And from the National Confederation of Retirees they urge that the contribution rate be balanced in a context in which companies generate profits at the expense of workers.

The groups agree that, beyond the academic and technical debate, the reform will not materialize if there is no political decision of the Government for pension reform.

The working group headed by Bazán it also intends to articulate a tax reform to broaden the resource base that the State can receive in order to attend to the changes inherent to having a new pension model that reaches more workers and dignifies pensions upon retirement.

reactions

Cesar Abanto, lawyer

“The system we have is a failure today (…), it is exclusive. It cannot be successful if only 22% of workers are protected. Only two out of 10 workers can yearn for a pension.

Javier Olivera, economist

“A single element that generates consensus among all is to begin to universalize Pension 65 (…). I believe that the reform should be mixed with different sources: social pension, distributive, pay-as-you-go and CIC”.

Erick Villanueva, pdte. ancije

“Before being pensioners, we received salaries to survive. The pension model has to be linked to political decisions. We must seek allies and have representatives in these bodies”,

Giovanna Prialé, President of the AAFP

“People (in the ONP) do not have an individual capitalization account (…). We do believe that the public pension system could gradually migrate towards one of individual capitalization”.