Alex Contreras urges Congress to prioritize pension system reform before promoting further AFP withdrawals

He head of the Ministry of Economy and Finance (MEF), Alex Contrerasurged the Congress of the Republic to give priority to the reform of the pension system that his portfolio will present next March before debating a new withdrawal of the AFPs.

This statement by the Minister comes within the framework of the fact that since the Parliament Up to five legislative initiatives have been promoted with the aim of allowing new advance withdrawals of funds from members of the AFP.

“He regretted that the incessant levies on pension funds had reduced to a minimum the expression of Private pension system (SPP), which is worrying because it will lead to a crash in the economy and many will be left without a pension for their old age,” Conteras said.

With regard to the previous six withdrawals, the head of the MEF He said it was understandable that in the course of working life crises arise and one needs immediate resources. “It happened during the pandemic where you needed money to buy medicine and oxygen, but now the context is different,” he added.

A few days ago he Minister of Economy and Finances describes these initiatives presented by the Congress of the Republic as “populist” and “negative” measures for the thousands of pensioners in Peru.

Similarly, Minister Contreras stressed that a constant concern of Foreign investors in the country is the possibility of new AFP samples, because when you want to sell a bond, the natural buyer is pension funds. “Then the additional pension fund withdrawals take liquidity away from the market,” he added.

Between the years 2020 and 2021, according to the Superintendence of Banks, Insurance and AFP (SBS)he Executive power and the Congress of the Republic authorized five extraordinary retirement savings withdrawal programs for members of the Private pension plan (SPP).

These programs meant, from December 2021, the withdrawal of S/65.942 million from the pension funds which was carried out by 5,691,478 affiliates. This means that 70% of affiliates have totally or partially withdrawn their retirement savings.

And according to the AFP Association, if added to the new amount withdrawn last year with the previous five, from PSP S/ 87.962 million left between 2020 and 2022, i.e. 10% of the Gross Domestic Product (GDP).

In this direction, Giovanna Prialé, President of the AFP Associationin an interview for Diario Gestión, indicated that to date there are 2.3 million members of the PSP that they have no soles in their accounts and therefore would not have the financial resources to cope with their old age.

weeks ago, the AFP associationwhich brings together four administrators of pension funds in Peru, presented a proposal to reform the retirement system which guarantees a minimum pension for the benefit of affiliates, as well as increased competition between fund managers and incentives for state contributions.

“This approach, which rewards the savings effort, the fundamental basis for building up a pension for old age, aims to guarantee a minimum monthly pension for people with at least 20 years of contributions and a gradual retirement for those who have contributed between 10 and 20 years.”, precise Giovanna Priale, President of the AFP association.

Similarly, the proposal presented by this union incorporates a Seed capitalwhich implies a contribution from the State to each newborn, thus financing Pension 65 for all Peruvians and allowing a more efficient use of State resources.