Pension reform: who is the most affected if the ONP model disappears?

In recent weeks, the debate for the pension reform has intensified in the Congress of the Republic. Of this, two opinions advanced to be evaluated in the Full. However, the president of the Labor Commission, Sigrid Bazan, denounced that the Fuerza Popular bench gathered signatures to set aside their pension reform proposal so that only the report of the Economic Commission chaired by Rosangella Barbaran.

The proposal put forward by the group led by the Fujimorista aims to maintain the current model of the AFPs and thus disappear the solidarity scheme of the ONP. What does it mean and who does it affect?

Pension reform: is an individual account in the ONP convenient?

The initiative of the orange legislator seeks that all those over 18 years of age have a Individual Capitalization Account (CIC), similar to the operation of AFP —, that is to say, what one contributes is received as a pension—; however, specialists in the field point out that not all affiliates This measure would be convenient for them due to the different job profiles that exist in the market: low salarieshigh incidence of unemployment, growth of the informalityamong others.

The economist and professor at the Universidad del Pacífico, Noelia Bernal, questioned, in a previous communication with La República, whether the individual accounts of the AFPs should be maintained in the new system, since an error is being made if it is believed that, Regardless of salary, pensions will improve for everyone.

The AFP model is not for everyone

“The individual account system is good only for those who have high salaries, contribute frequently and have a stable job. It is not good for those with very low incomes,” he told this outlet.

Those who receive between the minimum salary (S/1,025) and S/2,000 are guaranteed a pension of S/500 with 20 years of contributions to the ONP, an amount that is “much higher” or doubles what they would receive upon retirement in the individual scheme of the AFPs, in which “they would barely receive a pension of S/200 or S/250,” says the specialist.

Even, in the National Pension System model, if an affiliate contributes for just 10 years, he or she manages to obtain a proportional pension of S/250, subject to increasing said amount with facilities such as pension loans.

In addition, you can opt for a proportional pension of S/350 (with at least 15 years of contributions) or S/250 (contributing for at least 10 years).

AFP model: There is no minimum pension

For his part, Ítalo Lezcano, president of the Association of AFP Exporters, criticizes that there is currently no minimum pension in the private pension system.

“If you have had a salary for 25 years above S/3,000, you will have 40% of your pension when you retire, but not all people have the privilege of earning that amount. So, There are Peruvians who earn S/1,250 and they discount the AFP. The fund is according to what you have contributed and there are pensions of S/100 or S/200. It’s amazing,” he says.

AFP: more than 10,000 retirees receive less than S/500

According to data from the Superintendence of Banking, Insurance and AFP (SBS), more than 10,000 AFP retirees receive less than S/500 as a pension. Worse still, within this group, close to 2,000 pensioners earn less than S/100.

“In the AFP, you won’t even dream of getting a S/250 pension with a 10-year contribution. And even less in a current context, in which rates of low profitability in the coming decades”, points out Noelia Bernal.