Pension reform in Peru

If I’m not mistaken today is the day the Peruvian congress will debate a proposal to suck private pension funds up into the public treasury and vaporize them.

In the words of those advancing the proposal it sounds more noble and nuanced. The proposal is to create new public entity “Autoridad del Sistema Integrado de Pensiones” (ASIP) which will manage pension funds that are currently managed by large private entities. The current system consists of private (individual) accounts, the proposal by the congressional committee (Comisión de Reforma de Pensiones del Congreso) led by a Carmen Omonte intends to turn that money into public funds for the ostensible purpose of providing a fair pension for everyone, including the poor who typically don’t contribute to the private pension system.

Approval is probably a matter of when not if. Noble theories aside if you know anything about the Peruvian public sector you know the funds in your private pension account that you worked hard for are about to disappear into thin air. That’s just the reality of life in Peru.

Take it away Tom.

2 thoughts on “Pension reform in Peru

  1. As a public school teacher in the US for my career, I worked hard to build my pension funds for my retirement. I would be angry if the funds were unfairly taken from me.

    • I think it’s exactly that sentiment that’s missing in a big demographic here in Peru. Most of the poor and working class are concerned only with today, not some nice retirement or “golden years” in a distant future. It’s understandable to a degree but to improve the quality of life in Peru the society as a whole needs to think about the future, not just about today.

      The pension reform law is still in relatively early stages but in a country like Peru it’s hard to make something like that go away once the idea has been planted. The idea may be noble – and it should be said that the private entities that administer the current system have been consistent that they do support some type of reform to benefit those who don’t pay into the system – but if the government gets to manage money that is currently in individual accounts you can be sure that money goes up in smoke, that’s just the reality of government in these parts.

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