High informality and low productivity prevent pensions from being “decent”, stated Pablo Lavado Padilla, vice dean of the Academic Department of Economics at Universidad del Pacífico, during his presentation at the session of the work group “Strengthening and improvement of pension systems” of the Congress of the Republic.
After the diagnosis presented, the economist assured that a long-term solution is required that implies increasing the productivity of workers, which comes from the creation of decent employment. This, in turn, derives from encouraging private investment, lowering the costs of formalization and improving supervision.
What can be done in the short term? Lavado suggested starting with a non-contributory solidarity pillar: that each person has a seed capital at the moment they are born or at the moment they begin their transition to the labor market, which could be monetized until the person reaches retirement age. The fund would only be awarded if the person meets two criteria: low and unstable income.
The other part is the program Pension 65, which currently covers the extreme poor. “You can think about how to gradually increase its coverage, especially in urban sectors, and also gradually the pension that is granted. If we keep in mind that in the long term we want to increase the productivity of Peruvians, in the long term poverty will begin to decrease and the coverage of Pensión 65 and Contigo will also begin to decrease hand in hand,” he explained.
then there is the mandatory contributory pillar, which consists of a minimum pension for public and private affiliates who contribute for 20 or more years; and between 10 and 19 years, a graduated pension. While the independent workers who declare their income to the Sunat are affiliated through this entity.
“And finally a voluntary contributory pillar, which has to do with matched contributions as an incentive also for contributions. For each sol contributed by the affiliate, the State could contribute an equivalent amount until reaching a minimum pension,” Lavado said.
Take advantage of digitization
For his part, David Tuesta, former Minister of Economy and Finance, stressed that our country has a good regulatory framework for the financial system and a series of financial alternatives; however, they have not finished fitting in with the informal sector. Therefore, according to Tuesta, The challenge is to use the digital alternatives that exist to include the population in savings options for their retirement.
“It is very important that the system access mechanism is agile, understandable and very flexible for the worker. For this, it is necessary, on the one hand, to have this digital element within the ecosystem, pieces of behavioral economics, technological aspects, financial education issues, which are essential to try to inform a highly vulnerable segment, and that it be cheap and flexible. : are the key characteristics that this product must have”, explained Tuesta.
Likewise, it recommended three savings tools for pension purposes that are being used today: Miles for retirement (Mexico), Pensumo (Spain) and U-zave (Chile). The central idea of these applications is that they “reward” consumption with an additional contribution to retirement accounts.
Source: Larepublica
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