Stock market companies warn that new AFP withdrawal will harm retirement savings

The permanent members of the Advisory Council of the Superintendence of the Stock Market have expressed their concern about the Bills that seek to authorize a new extraordinary withdrawal of AFP funds. Currently, there are 12 initiatives, the last one presented by the Peru Libre congresswoman, Kelly Portalatino, and seeks to allow the voluntary withdrawal of up to S/19,800 (4 UIT) from retirement funds.

Among the representatives of this panel are the Association of Pension Fund Administrators, Peruvian Association of Insurance Companies, Association of Investment Fund Management Companies, Association of Securitization Companies, Association of Mutual Fund Management Companies, Association of Companies Stock Brokers, the Lima Stock Exchange, Procapitales and the Superintendence of the Stock Market (SMV).

Thus, regarding the proposals for extraordinary withdrawals, the different unions and companies have expressed the following notes:

• They harm the accumulation of members’ retirement savings, which reduces the income they could have during their old age.
• They affect the ability to make the managed fund profitable, because each withdrawal forces the composition of the portfolio to change towards more liquid assets that generate lower profitability or to sell some assets to obtain liquidity in the short term.
• They should not be used as a tool to inject liquidity in the short term to members, since they distort the purpose of pension savings, which is to obtain an income in old age.
• They limit the capacity for growth and dynamism of the Peruvian capital market, mainly affecting the long-term financing of companies and the State necessary for infrastructure works and for private and public investment.

In addition, members of the decentralized public body attached to the Ministry of Economy and Finance of Peru (MEF) have proposed alternative measures to strengthen the pension system and the capital market:

• Promote greater competition in the sector of pension fund administrators, with managers that are based on an Individual Capitalization Account model, and that protect the freedom of choice of members.
• Generate cost-efficient tools to ensure a minimum pension for all people, taking advantage of the long-term profitability of pension funds.
• Promote a pillar of voluntary, open and competitive pension savings, with the aim of improving the replacement rates of the pension system and contributing to expanding retail demand, promoting competition between participating institutions in the capital market.