Pension reform proposed by the Executive: what does it say about eventual AFP withdrawals?

There are 10 bills presented to Congress that point to a seventh AFP withdrawal and that, for the moment, are waiting to be ruled on in the Economy Commission. In this context, the Executive presented its pension reform project on Tuesday, June 20, in which it touches on specific points on the release of individual funds from the Private Pension System (SPP).

The document has the technical opinion of the Ministry of Economy and Finance (MEF), Ministry of Labor and Employment Promotion (MTPE), Banco Central de Reserva (BCRP), and Superintendency of Banking, Insurance and AFP (SBS). All these sectors make up the Multisectoral Commission for the reform of the current pension model.

Executive pension reform: does it allow AFP withdrawals?

Among the main points presented by the Executive’s proposal in chapter 7, led by the portfolio of Minister Alex Contreras, there is a prohibition on partial or extraordinary withdrawals of funds accumulated in the individual capitalization accounts during the active stage of the affiliates; that is, before his retirement.

However, the 23-page report specifies that, exceptionally, A withdrawal of funds would only be allowed in the following cases:

• Withdrawal of up to 25% for pay the down payment or repay a mortgage loan of a first property, as long as it is a mortgage loan granted by a financial institution or savings and credit cooperative.
• Withdrawal of up to 50% of contributionsincluding its profitability, when suffering from terminally ill or have a cancer diagnosis that reduces their life expectancy, declared by the medical evaluation committee of the SPP, provided that they do not have beneficiaries of survivor’s pension.

Other aspects that touches the reform of the Executive is the establishment of a minimum retirement pension common to the entire system, the promotion of voluntary contributions and the reduction of AFP commissions.

From the Multisectoral Commission, they also consider that banks, savings banks and other companies could manage the Pension fundsas long as they meet the requirements of the case.

AFP: how many withdrawals have been approved?

Due to the economic damage left by the COVID-19 pandemic, from the Executive and Legislative approved a total of six withdrawals of individual funds. According to data from the AFP Association, these disbursements implied the outflow of S/87,962 million between 2020 and 2022, which is equivalent to 10% of the Domestic Gross Product (GDP).