Peru has introduced a groundbreaking pension reform with the Law of Modernization of the Pension System, aiming to enhance equity and sustainability in pension access for all citizens.
The reform affects both the government-managed ONP and private AFP pension systems. The ONP is based on solidarity and funded by current workers, while the AFP offers more investment options dependent on market performance.
The new law establishes a minimum monthly pension of S/600 for workers with at least 240 contributions and restricts large withdrawals upon retirement. A novel “consumption pension” feature also directs 1% of electronic receipts to pension funds.
Peru’s Pension Reform
The reform includes automatic enrollment in the pension system for all citizens turning 18, aiming to increase coverage among young workers. It also allows competition in managing pension funds, providing more options and potentially better returns for contributors.
Despite controversy around restricted withdrawals, the reform represents a significant shift in Peru’s pension landscape, striking a balance between sustainable funding and expanded options for retirees.
