Reform of the pension system: what does the Executive’s proposal consist of?

The Ministry of Economy and Finance (MEF), the sector that presided over the Multisectoral Commission in charge of carrying out a technical evaluation of the Peruvian pension system and presenting a regulatory proposal for reform, published this Tuesday, June 20, the document with its formula. It should be noted that hours before, the head of the MEF, Alex Contreras, He stated that they will wait to receive comments to reach a final text that must be approved by the Council of Ministers.

What is the objective of the reform of the Executive? The universalization of affiliation to the system and the benefit of having a minimum retirement pension, facilitating access to these pensions and reducing the cost of the commission for administration of the funds, maintaining fiscal sustainability.

It should be noted that the Multisectoral Commission was made up of the Presidency of the Council of Ministers (PCM), the Ministry of Economy and Finance (MEF), the Ministry of Labor and Employment Promotion (MTPE), the Central Reserve Bank (BCR) and the Superintendency of Banking, Insurance and AFP (SBS), as provided by Supreme Decree No. 081-2022-PCM and No. 045-2023-PCM.

Automatic enrollment from the age of 18

As part of the proposal of the Multisectoral Commission, it is contemplated that all Peruvians will be automatically affiliated to the pension system when they turn 18 years old. They may freely choose between the National Pension System (SNP) or the Private Pension System (SPP). However, if they do not manifest an election, they will pass to the public system, being able to migrate from one system to another when the citizen decides.

In this way, coverage and access to a pension would be expanded, thus all Peruvians would be guaranteed a minimum pension in the future that will be financed by the State, provided that, upon reaching retirement age, they meet the requirements for number of contributions. , contribution amounts and others established in the regulations. Under this proposed scheme, the State would provide a non-contributory pension to those Peruvians living in poverty, over 65 years of age or with severe disabilities.

minimum pension

Access to the minimum pension would be gradual, in the first five years that the rule came into force Some 125,000 Peruvians could benefit with a fiscal cost of S/200 million per year on average.

“The proposal takes into account the need to provide a retirement pension to a highly informal workforce, accepting the OECD recommendations in view of Peru’s accession process to this group of countries with developed economies,” says the MEF.

voluntary contributions

It seeks to promote the contribution of independent workers and those who are in the informal sector. In the case of those who work for the State or for companies that provide services to the State as landlords, consultants or similar, they must make contributions for pension purposes, according to their income.

Independent workers who work for private companies, the contribution will also be mandatory, but taking as a reference the Minimum Vital Remuneration (RMV), S / 1,025. To encourage voluntary contributions, it is proposed that the State offer incentives such as, for example, doubling the contributions or deposits made by workers to their pension funds with a cap.

It is contemplated that users can use the return of the fourth and fifth category Income Tax payment for your pension fund. And those who do not make an annual income statement, may allocate to their fund part of the expenses in the items of tax refunds for work income (hotels, restaurants, among others).

more competition

To reduce the commissions paid by affiliates in the private system, the aim is to promote competition allowing banks, savings banks and other companies to also manage pension funds. The proposal considers that SPP affiliates who chose to remain in the commission scheme over remuneration will progressively be subject to a periodic tender or auction of commissions, proposing a more competitive dynamic among fund managers.