The economist and partner of the prestigious consulting firm Macroconsult, Elmer Cuba, stated that the pension reform approved by the Congress of the Republic is “modest and financeable,” and includes 10 million informal and independent workers, who for more than 30 years have been forgotten, without having access to a pension to face their old age.
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“The story is like this. Thirty years ago, a reform was made that left aside the great national majorities, which are the informal and the independent; only those who could build it had a pension. That is, all those who work formally and contribute, whether in the private or public system. And 10 years ago, Pension 65 was created, only for the extremely poor, but the great majorities of the informal world were always left aside. Today, Congress has reconsidered and has included this segment, that is the important novelty of this reform, which will ensure that by 2070 all Peruvian seniors will have a pension,” explained the expert.
He explained that the incorporation of informal and independent workers will take place through the consumption pension, which will mean that 1% of the annual consumption of all Peruvians will be deposited in an individual account, privately owned by each worker, to be used as savings for old age.
“If you are not on the payroll, once the law comes into effect, you will have to request an electronic receipt with your ID every time you buy something or make various payments such as your children’s school fees. In this way, Sunat will credit your contributions and will give you an annual support, up to 400 soles in your individual account. If you are informal, for 40 years, the State will put an amount so that your individual account will grow. Your piggy bank will be filled every year with 400 soles and will move with the profitability. That is only a support for your pension. It is assumed that when you retire, the State will complement you to equal a minimum part. That is a pension for consumption, which is a low amount, but the idea is to improve it in the future to complement and reach a floor equal for all Peruvians,” he specified.
When asked about the new feature of the pension reform, which includes a minimum pension of S/600 for all formal workers, Cuba added that the important thing about this measure is that, whether one is affiliated with the public or private system, one will have the same right to the state pension guarantee.
“What this law also has is that the minimum pension is for those who contribute and work formally. If you contribute 20 years to the national system or the private system, today in the private sector you do not have that right. On the other hand, in the public sector (ONP) you have a minimum pension guarantee. With this law, everyone will have that right,” he said.
But what would happen if the law is not promulgated by President Dina Boluarte, who has until Tuesday, September 24 to make a statement? “Let’s suppose that the law is not promulgated and we do nothing. Currently, only 50% of those over 65 are covered. And of that total, 50% is from the ONP and the other half from Pension 65, which is a subsidy of 125 soles per month. That is the reality. You are leaving aside half of the population, and those who are lucky enough to be formal and contribute to the private sector are withdrawing everything at age 65 (95.5% law), they have no pension. We have destroyed the pension system. With this law, we begin to rebuild this system in the right direction. It is a success from any angle,” concluded Cuba.
Promulgation
Economist and director of the ESAN University School of Government, Marco Vinelli, said that the Executive Branch must enact the law because it has already been made clear that it does not represent a higher cost for the State, and also gives tools to the Ministry of Economy and Finance (MEF) to maintain fiscal balance.
“It is important to enact the pension reform now, because if it is not done, it will be more expensive for the State later on, which will have to spend more to cover 100% of retirees. This is the great opportunity that the Congress of the Republic is giving to ensure that all senior citizens have a pension without a high cost to the national treasury,” he said.
Finally, he said that the law allows the MEF to have the necessary flexibility, such as defining the effective contribution units to be entitled to the minimum pension, evaluating the amount of this benefit every three years or prorating the annual distribution of the amount allocated to the consumption pension, to maintain an optimal balance between public spending on pensions and the annual budget.
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