On July 13, Peru's Congress raised the pension fund limit on investment abroad from 30 per cent to 50 per cent of assets. The increase in the limit will be implemented gradually as soon as the rules are published in the country's official gazette. The government expects this measure to broaden fund investment options and diversify risk. Over the past 5 years, the limit has been raised a number of times from 10.5 per cent of assets in 2006.
Currently there are four pension fund management companies (AFPs), with total assets under management of PEN 81.3 billion (USD 29.5 billion). Close to 30 per cent of those assets is invested abroad, 15 per cent is invested in Peruvian government bonds, and the remaining investments include domestic stocks and bonds. Since 2005, each AFP must offer three types of funds with varying degrees of risk: Fund 1, preservation of capital; Fund 2, balanced; and Fund 3, growth.
In Peru, public- and private-sector workers have a choice between the individual account system (SPP) and the public pension system (SNP). Those workers who do not make a choice are enrolled in the SPP by default. SNP members may switch to the SPP at any time, but most SPP members are not permitted to switch to the SNP. (Some older workers have been allowed to switch back to the public system.) Contribution rates are different for each system. For the SNP, workers pay 13 per cent of gross earnings for old-age, survivors, and disability insurance; SPP members contribute 10 per cent of gross earnings to an individual account managed by the AFP of their choice, plus an average of 1.95 per cent of total gross earnings for administrative fees, and 1.22 per cent of earnings-up to a maximum of PEN 7,586 (USD 2,756 per month)-in premiums for survivors and disability insurance, as of June 2011. Employers do not contribute to either pension system on behalf of their workers.
This article was extracted from the United States Social Security Administration publication International Update, September 2011.
Source: Social Security Programs Throughout the World: The Americas, 2009, US Social Security Administration, March 2010; "Peru," International Update, US Social Security Administration, October 2010; "Comisiones por la Gestión de Aporte Obligatorios y Primas de Seguro por AFP," Superintendencia de Banca y Seguros del Peru, junio de 2011; "Foreign Investment Limit Hiked to 50%," Investment Strategy, July 14, 2011; Boletín Semanal del Sistema Privado de Pensiones: Año 2011, Número 33, Semana del 15 al 19 de agosto de 2011.
Legislation date: 07.2011