AFP 2022 retreat: Economy Commission approved opinion on pension funds

The Congressional Committee on Economics, Banking, Finance and Financial Intelligence approved the bill empowering Pension Fund Administrators (AFPs) to return up to 4 ITU to members. This would be the sixth retirement of the Private Pension System (SPP).

The text that was adopted this morning in the parliamentary committee reflects the ideas of several bills submitted to dispose of AFP deposits. In these, it has even been proposed to withdraw 2 ITU, 4 ITU and up to 100% of funds. It should be emphasized that 1 ITU in Peru is equivalent to S/4,600.

This decision was informed by Congressman Edgar Tello (Peru Libre) through his social networks.

“Today, the Committee on Economics approved the withdrawal of the 4 ITU from AFP by a majority. We are fulfilling the promises in favor of the contributors,” he said in a tweet.

It is recalled that on May 7, 2021, Law No. 31192 was published, which allowed a new extraordinary withdrawal of up to 4 ITU (S/17,600) from pension funds. Affiliates would have been expected to enter their application from 27 May until 24 August last year.

WHAT DOES THE PROJECT INDICATE?

Article 3 of the draft proposes the return of up to 3 ITU, which is equivalent to S/13,800 soles. This is proposed for all members of the Private Pension System, without distinction.

As indicated in some media, if the project is promulgated, the Superintendency of Banking, Insurance and AFP (SBS) must determine the operational procedure for compliance with the rule no later than 15 calendar days after the law is published.

Once the withdrawal request has been submitted to the AFP, the first payment of up to 1 ITU must be made 15 days after the order is qualified. The remaining amount will be delivered in amounts of 1 ITU, every 15 days.

In addition, this withdrawal would be intangible, which means that it cannot be subject to discount, legal or contractual compensation, seizure, retention, or judicial.

The AFP Association estimates that this provision of 3 ITU for all members would generate an outflow of about S/20 billion soles from the system.

With this amount, it is estimated that a total of S/ 86 thousand 423 million soles would have been disbursed in the last two years. That figure is equivalent to 10% of GDP.

SBS EXPRESSED CONCERN ABOUT THE PROJECT

The Superintendency of Banking, Insurance and AFP (SBS) expressed concern about the drafting of these bills that seek to refer to more withdrawals of funds from the Pension Fund Administrators (AFP).

The deputy superintendent of SBS AFP, Elio Sánchez, warned that, among the 8.5 million members, 28% already “have an individual account at zero”.

“What we are seeing here is a valid concern of congressmen to address the urgency of Peruvian workers, but access to individual pension accounts is not the best way to address,” he said.

In addition, he emphasized that if 100% of the funds were allowed to withdraw to retire contributors, they would be left without coverage from EsSalud. In addition, they will have 35% less in future pensions for regular contributors from 40 years of age.

“In total, we are talking about nearly 66 billion soles that have been withdrawn from the first quarter of 2020 to last year,” Sanchez said.

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