Peru: Congress to approve a new pension fund withdrawal

PERU - In Brief 26 Mar 2024 by Alfredo Thorne

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Last night, Congress' Economy Commission approved by 17 votes (only 3 against) a bill approving the seventh private pension fund withdrawal. Initially the draft conditioned the 4 Unidades Impositivas Tributarias (UITs, the inflation index units, amounting each to PEN5,150 or US$1392) withdrawals to workers who had ceased to contribute in the last six months ending in December 31st, 2023 and allowed another 2 UITs to workers who have received oncologic treatment. Moreover, the withdrawal was part of a pension fund reform submitted by a special commission called by previous Finance Minister, Alex Contreras.  However, last night's withdrawal bill was extended to all workers contributing to the private pension funds. Moreover, they isolated the bill from the pension fund reform aimed at overhauling the private and public pension systems. We estimate that each worker would be able to withdraw up to PEN20,600, which translates into a total of PEN34 billion in withdrawals or 27% of the total outstanding pension funds. In the previous six withdrawals a total of PEN87,937 had been withdrawn. The bill could be voted upon in Congress's plenary as soon as this afternoon, although the head of Congress' Economic Commission is quoted in the press today saying that this may be too soon. The draft bill mandates the Superintendencia de Banca y Seguros (SBS, the bank and pension funds regulator) to publish the law regulation 30 days after the law's publication. Workers can apply for the withdrawal 90 days after the law regulation is published. They would get their funds in three tranches, 1UIT 30 days after the worker application is approved, another 1UIT 30 days later, and the last 2UIT...