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MEF seeks for the minimum pension to be homogeneous in the public and private system

MEF seeks for the minimum pension to be homogeneous in the public and private system

Although only at the end of May the Multisectoral Commission of the Executive Power will submit its proposal to reform the pension system to the Council of Ministers, to later be sent to the Congress of the Republic, the Ministry of Economy and Finance (MEF) —which chairs said working group— advanced which are the pillars under which are fine-tuning the pension initiative. Thus, the Executive’s proposal would have a multipillar approach: contributory, non-contributory and voluntary savings pillar.

Juan Zózimo, Vice Minister of Economy, pointed out that the aim is for minimum pensions to be homogeneous, both in the public and private systems, as long as a minimum number of years of contribution is achieved. “A bridge between the public system and the private system for the Ministry (of Economy) are the minimum pensions, which should be homogeneous so that arbitration between one and the other is not generated,” the official explained during his participation in the group of work Strengthening and Improvement of the Pension Systems of the Congress of the Republic.

Zózimo Pichihua also indicated that in the event that the minimum years of contribution are not reached, a proportional pension would be contemplated. However, if the affiliate only contributed a few years and does not reach any of this type of pension, he will receive a guaranteed non-contributory pension. Regarding non-contributory pensions (Pension 65), the MEF announced that the idea is to expand its coverage so that it also reaches poor citizens. Currently, this program is focused on the extremely poor population.

It is worth mentioning that this proposal had also been shared by the Central Reserve Bank of Peru (BCRP), because at the end of 2021 there were 249,000 citizens in a situation of monetary poverty who do not receive any type of pension. The MEF official stressed that these measures would help increase the population that receives a pension. “In this way, coverage would be increasing, not only because we are increasing the possibility of eligibility to receive pensions, but we are also helping to formalize it. And going from 50% to having even 70% to 80% of the population that receive a pension”, pointed out the vice minister during his presentation.

  X-ray of the Peruvian pension system.  Photo: Infographic The Republic

X-ray of the Peruvian pension system. Photo: Infographic The Republic

Increased competition and automatic enrollment

One of the problems that the private pension system has is the little competition that exists. For this reason, from the MEF they are in favor of the entry of new actors and incentives are given to generate greater profitability in favor of contributors. “The vision that the MEF has is to open the field more, generate greater competition in the system because the issue is not necessarily maintaining an AFP system, it is maintaining fund management in favor of the affiliate and being able to know from the very beginning how much the affiliate is going to receive in the future”, affirmed Andres Zacarias, General Director of Financial Markets and Private Pension of the MEF.

Likewise, the Executive would be considering a progressive and automatic affiliation to the pension system. In this way, it is ensured that the citizen is included in the pension system, whether public or private. It is also proposed that all public workers, regardless of their labor regime, must be incorporated into the system.

Reconsideration scheduled

The Congressional Labor Commission scheduled for today the reconsideration of the vote that rejected the ruling that creates the Universal Integrated Pension System (SIUP), which incorporates the public and private system, as well as the Pension 65 and Contigo programs. The trade union centers and pension associations supported the proposal of the parliamentary working group.

The word

Andres Zacarias Camac, General Director of Financial Markets and Private Pensions of the MEF

“The vision that the MEF has is to open the field more, to generate greater competition in the system, because the issue is not necessarily maintaining an AFP system, is to maintain a management of funds in favor of the affiliate”.

Source: Larepublica

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