Victorhugo Montoya: “Recognition bonus impacts analysis for an improvement in pensions”

After 20 years, the recognition bond will be updated thanks to a regulation promoted by Congress. However, the head of the ONP expresses his concern because this norm would generate a high fiscal cost for the State and a massive transfer of affiliates to the AFP.

— What impact would the recognition bond (BdR) have?

We are concerned about what can be achieved with this measure, taking into account that a pension reform is also scheduled in the future, both on the side of the Congress of the Republic and also on the Executive. In the financial field it could generate a cost of up to S/40,000 million that would have to come out of the Public Treasury and we also have to worry about the feasibility of this in terms of the National Pension System (SNP).

— The ONP would have to use public resources…

Indeed, everything that is paid by recognition bonus comes out of the Public treasure, this money does not come from the contributions of the affiliates. With everything that is collected from members, the pensions for the same month of the retirees are paid immediately, so what the money from the Public Treasury will be is to inject money that they have for other needs, to contribute to the System Private so that you can solve this bonus.

— In the short term, what would be the impact?

It is expected that around S/6,500 million could be disbursed per year, and that money would come exclusively from the Public Treasury.

— How many affiliates?

Those who disaffiliated from 2002 to 2022, which are close to 3.2 million people and all those who could move from the National System to the Private System.

— How many would migrate to the AFPs?

We are assuming that everyone would switch to the Private System, but there is a group that has already switched and could claim the recognition bonus.

— How much would the BdR per affiliate amount?

People think that they are going to receive a very high bonus, but it is a contribution made a long time ago by people who left the National System and contributed a little and it does not even reach S/4,000, which would be the amount of the recognition bonus. but for many people it is high (the fiscal cost).

– It’s an average amount…

Yes, S/3,600 we are calculating the amount that would be expected for people who reach 65 years of age. It is what the person contributed to the National Pension System that would be passed on as a bonus to the AFP.

— It is said that this norm would imply the disappearance of the ONP. Would this generate a monopoly in the pension system?

What happens is that currently two pension regimes coexist, which cannot be connected to each other because they have different logic (…) When opting for recognition bonds, it was a clear intention of the Government at that time to bet on a system that was just being created, which was the Private Pension System (SPP). Over the years both systems have stabilized, each one sees the nature it has and the possibility of connection is minimal. For example, there are people whose individual capitalization account (cic) of AFP is zero after the withdrawals of contributions and perhaps those people would like to switch to the SNP, but they cannot by law, so it is possible to switch from one system to another, but it prohibits the switch from the Private System to the National System, which puts a system at a disadvantage .

— How does this measure benefit the AFPs?

They could benefit from a greater number of affiliates, who could be more interested in the private system and which they would have to manage there, and logically they charge a commission for that, but it is part of the rules of the game. What is changing are the rules of competition between the pension regimes, they allow you to change from one system to another, but they do not allow you to return to the previous one or change to the previous one. What they are inviting you is only a transit from one side to another and logically the ones that could benefit from the new affiliates is the Private Pension System.

— Will they question the rule before the Constitutional Court?

It is a possibility that the questioning is handled, given that the norm could have unconstitutionality vices, such as the first transitory final disposition of the budget balance when any pension reform is given. It is also in the Constitution the congressional spending initiative, in addition to the State’s demand to achieve true protection for people who are in the different pension regimes. We do believe that there would be some issues to object to in the constitutional sphere, but it will be at the right time.

— As long as there is no ruling that says otherwise, they must abide by the law…

We have to be respectful in a rule of law; If the standard is still in force or should even be applied, we would have to do it in the most suitable way possible and respecting the operational feasibility that it could have.

— Would the payment of pensions be at risk?

The SNP has an annual payment of S/5,000 million from pensioners. Approximately, close to S/3,800 million is collected, a small part is covered by the Consolidated Pension Reserve Fund that contributes S/200 million, and the rest is paid with the Public Treasury. If we want to generate more costs to the Treasury, it also generates the Possibility of financing the things that they have projected in pension matters. If this is going to generate very strong pressure on the Treasury, perhaps at some point it could generate difficulties for the payment of pensions. What we would also have to evaluate is any type of improvement in the pensions of retirees, since there would be cutting off any analysis that could be thought of in that line.

— Would the BdR stop a possible improvement in pensions?

Of course, because it generates a cost that was not previously foreseen, we were projecting things, but logically if Congress generates a cost that was not foreseen, the amounts that were established will have to be redirected.