Congress seeks to approve a new 100% withdrawal from the CTS: what would be its impact on the national economy?

After the approval of the withdrawal of up to 4 UIT (S/20,600) from the Pension Fund Administrators (AFP), Congress is preparing the debate on a series of bills that seek to release 100% of the Compensation for Time of Work Services (CTS) to “cover the economic needs of the population caused by the impacts of the recession that the country went through.”

These initiatives have been collected by the Labor and Social Security Commission, which will discuss, this Tuesday, April 16, a new prediction to extend the deadline for this disbursement that expired on December 31, 2023. As is public knowledge, in the In recent weeks, various parliamentarians such as César Revilla and Maricarmen Alva have joined the list of authors with legislative proposals in this regard.

Congress seeks to approve a new 100% CTS withdrawal: how would it impact the national economy?

In Parliament, there are 15 bills that seek to authorize formal workers to withdraw 100% of the amount corresponding to Compensation for Time of Service (CTS). One of the ruling commissions is the Labor and Social Security Commission, which, in November of last year, approved a legislative formula to extend the validity of this disbursement until December 31, 2024.

Said substitute text accumulated the bills 5009-22-CR, 5185-22-CR and 5311-22-CR of parliamentarians Jorge Flores (Popular Action), Alejandro Soto (Alianza Para el Progreso) and Flavio Cruz (Free Peru) , respectively. After that, seven other initiatives with the same temporality were presented, in addition to four additional ones to access the CTS withdrawal until the end of 2025 and one to release this economic benefit until 2026.

“The CTS is the discount they give each worker from their remuneration. So, that is an account that has nothing to do with the MEF or any other entity. That comes from the worker himself and, by law, it is a labor right “We will make the proposal and, if the congressmen do their part, on that, we will structure and approve the opinion,” said the president of the Labor Commission, Pasión Dávila, who confirmed to La República that this Tuesday a new opinion will be discussed that proposes extending the deadline for the free disposal of the CTS until December 31, 2024.

Let us remember that, to date, three withdrawals of CTS funds have been authorized. The last of them occurred on December 31, 2023 through the promulgation of Law No. 31480, which sought to cover the economic needs caused by the COVID-19 pandemic.

In the opinion of economist and teacher Armando Mendoza, the impact of a possible disbursement of this economic benefit would be “marginal”, since the percentage of workers who have money accumulated in their accounts represents a minority.

“The percentage of those who still have something to withdraw are simply a minority. Compared to 2020, billions of soles entered the economy because people took out their money to spend. In reality, those who were in a situation of precariousness, that they needed to resort to their funds, they already did it a long time ago”he explained.

Finally, Mendoza said that the CTS should act as unemployment insurance in an ideal scenario. However, it has become a palliative to mitigate the impacts of the permanent economic crisis that the country is experiencing. “The issue is that here we are no longer talking about a contingency situation, but rather a permanent crisis due to the ineffectiveness of the government. Basically, what we have had has been a contraction in which jobs have been lost again and levels have fallen. So, the CTS has become a palliative,” he stated.

If the CTS withdrawal is approved, what recommendations should I take into account?

Economist Armando Mendoza suggests that, given the eventual approval in Congress of the disbursement of 100% of the CTS, workers can take into account the following recommendations according to their needs and interests:

• CTS money can be used to pay off debts with the aim of reducing long-term financial expenses such as mortgages or credit cards.
• Allocate a part of the CTS to create backup for emergencies or make investments that generate a financial return.

CTS Retirement 2024: how many bills have been presented?

In total, there are 15 bills that seek to authorize a new disbursement of 100% of the CTS. The last two initiatives were presented by María del Carmen Alva from Acción Popular and César Revilla from Fuerza Popular, who seek that the deadline to make this disbursement be until December 31, 2024. Below, find out about all the legislative proposals:

1. CTS retirement until December 31, 2025 – Jorge Luis Flores (Popular Action)
2. CTS Retirement until December 31, 2024 – Alejandro Soto (Alliance for Progress)
3. CTS withdrawal until December 31, 2024 – Flavio Cruz (Perú Libre)
4. AFP withdrawal of up to 4 UIT and CTS withdrawal until December 31, 2025 – Luis Aragón (Popular Action)
5. CTS withdrawal until December 31, 2024 – Jorge Coayla (Perú Libre) }
6. CTS retirement until December 31, 2024 – Raúl Doroteo (Popular Action)
7. CTS withdrawal until December 31, 2025 – Segundo Montalvo (Perú Libre)
8. CTS Retirement until December 31, 2024 – Edgar Reymundo (Together for Peru)
9. CTS Withdrawal until December 31, 2026 – Segundo Quiroz (Perú Libre)
10. CTS Retirement until December 31, 2025 – José Pazo (Somos Perú)
11. CTS Retirement until December 31, 2024 – Elva Julón (Alliance for Progress)
12. CTS retirement until December 31, 2024 – Gustavo Cordero Jon Tay (Popular Action)
13. CTS retirement until December 31, 2024 – César Revilla (Fuerza Popular)
14. CTS withdrawal until December 31, 2024 – María del Carmen Alva (not grouped)
15. CTS Withdrawal until December 31, 2025 – Digna Calle (Vamos)