After the approval of eighth withdrawal from AFP fundsthere are legislators who aim to collapse the entire reform of the pension systemso there are around 26 bills that raise the repeal of the norm.
But not only that, some leftist parliamentarians even go further and want pensions to be only in the hands of the State, that is, disappear to the private and the possibility that people choose to have their money in individual capitalization accounts. For example, Congresswoman Sigrid Bazán has a proposal that creates the Universal Integrated Pension System, while Américo Gonza has indicated that the foundations must be laid for a public, solidarity and universal administration to exist.
However, something that legislators do not explain is why in Peru these types of proposals come with incorporated risk that all contributors would assume.
It should be noted that the National Pension System of Peru (SNP) was created in 1973 through decree Law 1999 and works under the distribution modality. Currently, it is administered by the Office of Pension Standardization (ONP).
“SNP in Peru initially worked as a global pure capitalization system, in which a group of workers accumulates a part of their income in a fund, which is financially managed by generating profitability. In this system, when a generation of workers reaches the age of retirement, their pensions are covered with the income generated by the fund, without distinction of the individual amount contributed and the amount of pension to receive. Mass capitalization in which if the management of the reserve fund is done well, that fund is enough to cover future pensioners.
In that same document, reference is made to the fact that the creation of the Private Pension System (SPP), in 1992, was due to the fact that the SNP went bankrupt by several factors, among them, that there was no direct relationship between what one contributed and the benefit he was going to receive, therefore, there was no individual interest in contributing to the fund.
Aging as a factor
One of the conclusions reached in the BCR document is that a distribution system, with a good financial administration of its reserve fund, sooner or later enters crisis due to the aging of the population.
In this regard, the former Minister of Economy and current president of the Peruvian Association of Insurance Companies (APSEG), Eduardo Morón, said that the cast is only successful when retirees are much less than the contributors.
“What is going to happen is that, what is called the dependency rate, which measures the proportion of people charging pension among the people who are working, will vary. That today is 20%, in 2050 it will be double. Then, we are going to a situation in which we are going to have fewer people of working age and where pensioners will live longer. Therefore, with all this it will be more expensive to address the payment of pensions,” he explained.
He also explained that in Peru the SPP was chosen because the system in general includes a large amount of resources that can be a “temptation” for the State.
“Before the creation of the SPP, the State issued bonds that the only ones who bought it was the SNP, and the State was not interested in paying those bonds, they default them, so that the return of those funds was not only low, but negative,” he added.
Similarly, he pointed out that any pension reform must be sustainable to the country. In addition, he indicated that with a unique and public system, there is a risk that changes are approved in Congress where pensions are increased without limits, which would harm public finances.
“We in the Constitution have a final disposition (the second) that says that any pension reform must be financially sustainable, so if the Congress approved an initiative like that sought by some legislators, a Constitutional Court would say that this is not sustainable by the demographic issue,” he added.
Politics involved
For his part, former Minister of Economy and Finance David Tuesta said that having only one system, and public, incorporates too many risks for contributors, one of whom is linked to politics.
“The problem is that this system will be subject to decisions that are made in the political sphere. Public administration is always a risk. To this is added that a subsidized system incorporates a problem into the fiscal box. What I notice is that the demographic risk is not being measured either,” he said.
The former official considered that ONP as such is not a failure, however, he considered that it is a scheme that does not supply itself, therefore, it is insufficient.
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