61% of members are in favor of a new AFP withdrawal

The economic crisis affecting the country has prompted the consideration of a seventh withdrawal of the funds managed by the Pension Fund Administrators (AFP).

More than a dozen initiatives are promoted by Congress that propose the possibility of releasing up to 4 UIT (S/19,800)of which, two of them are already on the agenda of the Economy Commission.

These projects have popular support. According to the latest national representation survey carried out by the Institute of Economic Studies (IEP), 61% of members of the Private Pension System (SSP), that is, 6 out of 10 people, agree with the proposal to authorize a new withdrawal from the AFPs; while only 26% disagreed.

Although the proposal is supported by the majority of the population, approval is much higher in urban Peru with an acceptance of 65% and in those members between 25 and 39 years old (67%), followed by the older population. young, between 18 and 24 years old, with 62%. If segmentation by sex is taken into account, 63% of men were in favor, and among women the figure was 59%.

The initiative is also much more popular in socioeconomic levels A/B and C, where 65% are in favor of a new release of pension funds.

Fund destinations

According to the survey, if the withdrawal of funds were approved, all members would use this money.

The majority, 58% of those interviewed, that is, approximately 6 out of every 10 people, would choose to invest or start a business with these resources. Within this option, 66% of the members who chose it reside in urban areas, and 79% are in the central macrozone.

Meanwhile, 10% of members who would withdraw their pension savings would choose to direct this money to expenses related to the basic basket such as food, clothing or payment of services. The highest percentage of those interviewed who chose this option belong to rural Peru (23%) and are from the D/E socioeconomic sectors (16%).

10% of people would use it to pay debts and 8% would save it. Of those who plan to save, the majority are Metropolitan Lima (13%). Only 1% stated that they would not withdraw this money.

Previous withdrawals

To date, six extraordinary withdrawals from pension funds have been authorized AFP.

The recent IEP survey reveals that 64% of respondents stated that they have already chosen to withdraw their money, while 35% preferred to keep their pension savings in their individual accounts. Withdrawals stood out in the south (73%) and east (76%).

Indeed, according to information from the SBS, more than 3 million 133,149 affiliates withdrew up to S/18,400 from their AFP in the sixth release of funds.

Of the group, 1 million 958,035 were men and 1 million 175,114 women. The predominant age range was between 21 and 55 years.

Poor coverage

On the other hand, 72% of those interviewed indicated that they are not affiliated with an AFP, and only 28% answered that they belonged to the private system.

84% of those who are not linked are in rural areas (84%) and the majority are between 18 and 24 years old. Furthermore, 79% are women.

The need for extra income is reflected

Analysis. Saúl Elguera, member of the Opinion Studies Area of ​​the IEP

This data must be viewed carefully; although approval may be relatively high, that does not mean that this policy has to be applied or that it is appropriate. I think it is basically the reflection of society’s need for extra income to be able to meet its needs.

Acceptance is higher in the 25 to 39 year old group because it is the sector that would be actively contributing the most, since it is where the working mass is concentrated. Furthermore, they are the ones who have the greatest amount of contributions at this time or at least have a relatively accessible amount of contributions to withdraw and do something else with that extra income. In sectors A/B, the high acceptance is due to the fact that usually these sectors are the ones that are most placed in formal jobs and are the ones that contribute to the AFP.

Regarding the preference to invest the withdrawn, I think it is basically another signal that tells us that there is a need to require some extra business from the people who are within the AFPs.

However, I think it is not a good time to authorize a withdrawal, since the AFPs do not have the purpose of making withdrawals in times of crisis. Although withdrawals were made due to COVID-19, it was for something very extraordinary, when the economy is totally paralyzed. I understand that perhaps this large number of acceptance among the population is because it basically reflects the population’s need to have more income, but I don’t know if it should be the State’s response, because the AFPs do not have that purpose. Furthermore, the effect will be mainly in the formal sector, and the formal sector is not the vast majority of people.