How to switch from ONP to AFP: step by step to apply without losing my contributions

As we already know, there are two different pension systems in Peru: the IN (Pension Standardization Office) and the AFP (Pension fund administrators). The former is a public social security system responsible for providing pensions to state workers, while AFPs are private fund managers that provide pensions to private sector workers.

Each has its advantages and risks, but in the following note we will detail how to switch from an ONP to a AFP. In addition, we will show you the consequences of this movement and what possibilities you have to avoid losing your contributions.

– Request disaffiliation from the ONP:

1. Go personally to one of the ONP offices with your identity document and seek the attention of an adviser.

2. Submit a writing disaffiliation and transfer request (if they don’t give it to you, pass it around)

3. The ONP will issue a receipt for this disaffiliation, keep it.

4. Before disaffiliating from the ONP, it is recommended that you check your contributions in the ONP, by downloading and printing your statement of account. This will facilitate the process of knowing if you qualify for one of the recognition bonuses.

– Then go to the offices of the chosen AFP (evaluate the best option).

– sign the Membership Agreement.

– Attach a copy of the DN and a photocopy of the payment slips for the last two months

– Attached document of disaffiliation from the ONP

– AFP Housing: is part of the group Inversiones La Construcción de Chile.

– AFP Profuturo: of the Scotiabank group.

– AFP Press: of the Credicorp group.

– AFP integrates: of the Sura group.

These are the different alternatives (4) that exist so that affiliates can invest their contributions in the Private Pension System (SPP). These will generate long-term returns (they will increase their retirement savings) and affiliates will be able to choose the fund that best suits their expectations and needs, taking into account their risk profile and age.

Fund 0 – Capital protection

– Profitability: Stable

– Risk level: Minor

– Recommended for: Retiring Affiliates

Fund 1 – Capital preservation

– Profitability: Stable

– Risk level: Minor

– Recommended for: Affiliates aged 60 or close to retirement or with a conservative risk profile.

Fund 2 – Balanced or mixed fund

– Profitability: average

– Risk level: Medium

– Recommended for: Affiliates between the ages of 45 and 60 or those willing to take on more risk than Fund 1.

Fund 3 – Capital Appreciation Fund

– Profitability: High

– Risk level: high

– Recommended for: Affiliates up to 45 years old, as they are still far from retirement age, or for those who are ready to take on greater fluctuations in profitability by thinking in the long term.

AFP

– It is based on the individual capitalization system; that is to say that your contributions are paid into an account in your name, where you build up your pension fund over the years. This fund is made up of your contributions and the profitability they have generated.

– Contributing to your AFP over the years is very important, because this file will influence the pension you will receive. However, since your fund belongs to you, there is no mandatory minimum period to contribute.

– In AFP there is no limit, since your future pension depends on the frequency of your contributions, the profitability generated, your type of fund, among other factors explained above.

– The average SPP statutory retirement pension is S/1108 in May 2020, according to AFP’s Statistical Bulletin (SBS).

IN

– At the ONP you contribute to a mutual fund (pay-as-you-go scheme), which finances the pensions of current retirees. According to this principle, when you retire, your pension will come from the fund established by the contributors at that time.

– For the ONP to be sustainable, the number of contributors must be greater than the number of retirees.

– At the ONP it is Obligation to record 20 full years of contributions. If you reach the age of 18 and 3 months of contributions at the time of your retirement, you will unfortunately not receive a pension.

– At the ONP, even if you have contributed for more than 20 years, the maximum pension you could receive is S/893.

If you have contributed to the National Pension Scheme, there is a possibility of recovering your savings by obtaining a Recognition Bonus. Before joining an AFP, you can seek advice on whether you are eligible for a Bonus.

If you contributed to the ONP until 2001, then it is possible that you could receive the Recognition bonus. It must be taken into account that It does not apply to everyone and depends on an assessment, so before joining an AFP you should find out if this benefit applies to you. There are 3 recognition obligations:

Bono 1992: contributions paid for 48 months to the National Pension Scheme (SNP) between December 1982 and November 1992. Contributions paid to the SNP up to November 1992 are recovered. The amount varies up to a maximum of 60,000 soles

Bono 1996: You must have documents justifying 48 months of contributions to the SNP between January 1987 and December 1996. The contributions paid to the SNP until December 1996 are recovered up to a maximum value of 60,000 soles.

Bono 2001: contributions to the SNP for at least 48 months between January 1992 and December 2001 or date of affiliation. Similarly, the amount varies up to 60,000 soles.

It is possible, but the money accumulated in your individual account will cease to be the property of the worker and will be transferred irreversibly to the common fund of the national pension system. What you will be able to recover are your voluntary contributions with no temporary purpose, although it is possible that you contract a debt with the ONP, since the monthly contributions which are made are superior to the facts in the AFP; therefore, the employer must pay said balance.