Peru Congress Edges Closer to Giving State Control Over Pensions
A Peruvian congressional committee approved a bill to overhaul the country’s pension system, triggering warnings from the fund-management industry that the government will get control of billions of dollars of private savings.
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Lawmakers on the pension reform committee voted 6-2 in favor of legislation late Tuesday that seeks to replace the existing private and public pension plans with an integrated, government-run system. The bill will now be sent to the floor of congress for a final vote, at an undetermined date.
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The proposals have alarmed the country’s private fund managers — known as AFPs — who say the $45 billion they manage will be vulnerable to state interference and even seizure. Giovanna Priale, who heads a group representing the industry, said the plan equates to a “nationalization” of the savings. “The AFPs want to keep improving — with performance-based fees, higher returns and greater competition — but by no means should that mean destroying what’s already there and starting from zero,” she said.
The overhaul would be the biggest since the current pension system was created in 1993, when the bankrupt national pension fund was replaced by a government-run, pay-as-you-go fund and the AFP system of individual accounts.
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