MEF: more than 50% of affiliates do not regularly contribute to their pension

There are more than 18 million members of the Peruvian pension system –between the ONP and the AFP–; however, 50% “do not contribute regularly”, according to the Ministry of Economy and Finance (MEF). While almost 5 million citizens of productive age are not affiliated with any pension scheme.

“In other words, there are currently fewer workers making contributions to finance a greater number of pensioners and an increasingly longer retirement period,” said Juan Pichihua Serna, Vice Minister of Economy, during his speech at the international seminar ‘Perspectives and challenges for pension systems’ of the ONP.

In this sense, the economist Fernando Cuadros points out that the transition of workers from formality to informality is one of the main factors of the little regularity to contribute. “Since there is no obligation to contribute for independents, then they also stopped doing so,” he said.

In addition, low economic growth is associated with lower formal job creation, which in turn generates a lower affiliate and contributor base.

Let us remember that in the current context, the projections for the end of the year are quite pessimistic. While in 2022 this indicator closed at 2.6%, by 2023 Credicorp projects that it will only reach 1.3% and even the MEF, which is usually more optimistic, continues to adjust its target downwards. The last one was 2.5%.

For the economist Noelia Bernal, the low regularity of contributions in the AFP It means that workers have minuscule funds for retirement, while in the ONP there is a risk of not fulfilling the 20 years of contributions that ensures a minimum pension of S/500.

He added a second factor, and that is that it is logistically complicated for an independent worker to join any pension system. “It takes more than 40 days to affiliate and in paying your first contribution. This should be instantaneous, just like when you buy a phone and after 6 hours you can use it (…). This use of technology has not reached the ONP ”, she explained.

While in the AFP the affiliation is faster, but the contribution is still intricate.

Reform on hold

Today there are three proposals to reform the Peruvian pension system, but they have been put on hold. Both specialists agreed that the proposal of the Economic Commission of Congress is the “weakest” because it raises individual accounts for everyone, which is detrimental to the majority of workers. Regarding the document of the Work Commission, they said that it is more “elaborated” because it proposes migrating to a mixed system and is in line with what is recommended by international organizations. Finally, the Executive’s draft is still “limited”, but a success is the affiliation from the age of 18, which would allow the expansion of coverage.

Pensioners go to the Constitutional Court

In the last decade, on average, 30% of the procedural burden of the Constitutional Court (TC) is related to pension cases “in its various regimes,” reported the president of this institution.

“The large number of cases that arrive at our headquarters have gone through an administrative process; then these have been prosecuted through the amparo process to finally reach the court,” he explained. Francisco Moralesholder of the TC.

In these stages, the workers have been denied access to a pension, as well as a lack of calculation of years contributed and only the cases denied by the PJ reach the TC.

The word

Juan Pichihua Serna, Vice Minister of Economy

“We face to demographic, economic and social challenges that demand an urgent and in-depth review of the current situation of the pension systems”.