The withdrawals of funds from the AFPs have caused the Peruvian pension system to suffer a fall in the Mercer Global Ranking and the CFA Institute.
Excessive access to pension savings has widely and seriously compromised the financial sustainability of the system, explained David Cuervo, director of the Business Unit, Wealth and Financial Welfare for Mercer Andina, CA and the Caribbean.
“The authorization of the new withdrawal of money from private pension funds occurs with the argument of helping families economically affected by the pandemic and price increases, but the only thing this generates is a high social impact on those over 65 years of age,” said Cuervo.
According to Mercer, although the Peruvian pension system raised its rating in the general index to 55.8, above the 55 points it obtained in 2021, fell from 29th to 30th in the world ranking of retirement income systemsgoing from the rating of C+ to C.
In addition, the improvement compared to 2021 would be explained mainly by an adjustment in the methodology that recognizes the efforts to provide better benefits to the least favored and the increase in coverage of old-age protection schemes.
Another factor that contributes to the country’s low rating is related to social security education, which is low, warns Mercer.
“The contribution to the pension system is seen as a real tax and faced with any possibility of accessing these resources, the Peruvian has decided to access the resource, withdraw it and use it for a very different purpose than building pension savings,” Cuervo said.
The fall in the ranking, according to Mercer, ratifies the need to make adjustments that concentrate efforts to improve coverage of the population, put greater focus on old age care for the less favored and safeguard pension savings.
In contrast to Peru, at the level of Latin America, Uruguay achieved the highest score, with 71.5. This was due to the adequacy level of the benefit (84.5) that the population receives based on their income level.
On the other hand, Mexico was the country with the most notable improvement compared to 2021 thanks to its pension reform that increased results for people and improved pension regulation.
At the global level, the leadership was held by Iceland (84.7), followed by the Netherlands (84.6) and Denmark (82.0).
