They are preparing a new pension system: A false promise?

By Taxpayers Association

The Peru Libre parliamentary group would seek to strengthen the National Pension System (SNP). Said initiative would have a potential cost of S/6,700 million per year, with a significant impact on the public treasury, which would occupy 3.12% of the 2023 budget. Worst of all, it would not favor anyone because the SNP does not work well and Peruvians prefer the AFP.

Specifically, the initiative contemplates including in the SNP workers and owners of micro-enterprises no older than 40 years (and optional for those who are over 40), and thus develop a mandatory and general Social Pension System, since it does not contemplate a distinction between dependents and independent.

Among the characteristics to highlight, it is found that affiliates would contribute a maximum rate of 4% to individual accounts corresponding to the Minimum Vital Remuneration (RMV, a contribution that contrasts, for example, with the current 13% for ONPs and 10% for the AFPs To add to this, the State will grant an additional 4% (without exceeding a remuneration of 1.5 RMV), which reaches an 8% monthly contribution.

For example, if the current RMV of S/1,025 is considered, the worker’s contribution according to the 4% rate will be S/41 per month, in which the State will guarantee another S/41 to add S/82 as a contribution to the system. . The State also undertakes to provide a pension to all affiliates upon reaching the age of 65, regardless of the contributions they accumulate. The issue is not so much spending money, but rather that this system does not promote worker productivity, company growth, but rather maintain and raise subsidized “business dwarves”, with low pensions for their future.

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The option is not the correct one, even though –as always– there may be good intentions. In a current diagnosis, it can be seen that the current structure of the National Pension System (SNP) requires that, for each beneficiary, there are three private contributors, who make it possible to be granted a pension whose maximum amount is S/893 per month. , 13% lower than the Minimum Vital Remuneration (RMV).

The fact that individual accounts are created is also particularly important, because the SNP has 4.7 million members, where only 21% are active contributors, a situation that makes its future sustainability difficult. For this reason, the participation of the public treasury since 2017 has grown by 216%, something that will tend to increase more and more.

So, enabling the possibility of individual accounts with state subsidies would cause many workers affiliated with the state system to request a refund, transferring funds to an AFP, which would further underfund the ONPs. The road to hell is paved with good intentions.

Workers prefer AFPs

The number of affiliates to the Private Pension System (SPP), from 2010 to 2022, has increased by 16.6%, reaching 8.6 million workers, while in the National Pension System (SNP), the increase has been 9.6%, and reached 4.7 million affiliates.

When evaluating the active contributors for each system, since 2010 those of the private system have increased by 5.8%, well above what was achieved by those of the SNP, with 0.7%.

Only in the month of September 2022, the migration to the AFPs was 57,600 workers, with a monthly average of 20,000 new affiliates, something that, first of all, is putting pressure on public coffers to respond to refund requests under a Recognition Bonus of the funds deposited in the ONP, calculated at S/750 million.

Secondly, the flight of contributors from the ONP is defunding it at an accelerated rate, something that sets off alarm bells and invites an efficient solution to be found as soon as possible. And it is that the ONP was never attractive, it does not work well, it is bankrupt and should disappear.