Evaluación de una propuesta de sistema de pensiones multipilar para Perú

An Assessment of a Proposed Multi-Pillar Pension Reform in Peru 9 An Assessment of a Proposed Multi-Pillar Pension Reform in Peru Javier Olivera* Luxembourg Institute of Socio-Economic Research, KU Lovaina Abstract This article estimates and analyses the potential fiscal and distributive effects of a proposal to transform the current Peruvian pension system into a multi-pillar pension system. In this new system, part of the contributions would go to a solidarity fund to finance minimum pensions, and the rest to individual retirement accounts. The simulation of actuarial liabilities and future distributions of pensions are performed using random samples from the database of administrative records of individuals insured by the Peruvian public and private pension systems as at December 2013. This study analyses the effects of the reform on actuarial liabilities, inequality of pensions, and overall wellbeing of pensioners, in order to illustrate the different trade-offs involved in pension reform. At the same time, the explicit inclusion of normative judgments in the evaluation of welfare functions makes it possible to determine that a multi-pillar pension system is better than the current one, even under the stringent condition of no aversion to inequality. Keywords: Pension reform; pension inequality; social security; Peru; economic policies. * Article received on September 30, 2015; final version approved on March 11, 2016. Javier Olivera holds a Ph.D. from KU Leuven, is a researcher at the Luxembourg Institute of Socio-Economic Research (Liser), and a guest professor in the Department of Economics at KU Leuven. He was a member of the commission for the reform of the Peruvian pension system in 2012. His areas of interest include public economics, economic inequality, and pensions. Email: Vol. XLIII, N° 78, First Semester 2016: pages 9-40 / ISSN 0252-1865 DOI: http://dx.doi.org/10.21678/apuntes.78.851 Copyright 2016: Centro de Investigación de la Universidad del Pacífico 10 Apuntes 78, First Semester 2016 / Olivera Acronyms AFP CRU ENAHO GDP INEI IRA MEF OECD ONP MPS PAYG PV SNP SMW SPP Pension fund administrators (Administradora de fondos de pensiones) Required unit capital (Capital requerido unitario) National Household Survey (Encuesta Nacional de Hogares) Gross domestic product National Institute of Statistics and Information (Instituto Nacional de Estadística e Informática) Individual retirement account Ministry of the Economy and Finances Organization for Economic Co-operation and Development Pension Normalization Office (Oficina de Normalización Previsional) Multi-pillar pension system Pay-as-you-go Present value National Pension System (Sistema Nacional de Pensiones) Statutory minimum wage (Remuneración Mínima Vital) Private Pension System (Sistema Privado de Pensiones) An Assessment of a Proposed Multi-Pillar Pension Reform in Peru 11 INTRODUCTION More than 20 years have passed since the first wave of structural pension reforms in Latin America, which sought to give the private sector a bigger role in the administration of social security and to place greater emphasis on individual savings schemes. Some countries completely replaced their pay-as-you-go (PAYG) public pension systems with ones based on individual retirement accounts managed by private firms, inspired by the Chilean reform of 1981 (e.g., Bolivia, El Salvador, Mexico, and the Dominican Republic). Other countries developed mixed pension systems, in which a public and a private component make up the final pension value (Argentina, Costa Rica, and Uruguay). On the other hand, only Colombia and Peru retained a public PAYG system in competition with new private systems. More details on these reforms can be found in Arenas de Mesa and Mesa-Lago (2006). In recent years, it was again Chile that introduced substantial changes to its pensions system, which were primarily geared toward improving levels of system coverage and pension values as well as combating poverty in old-age. Kritzer et al. (2011) describe this reform and those of other countries in the region as second-generation reforms. These reforms seek to overcome the limitations identified in the pension systems that were reformed in the 1990s. Low pension coverage and, in particular, disparities in coverage and in pensions between income groups have been documented across most Latin American countries (Rofman and Oliveri 2011). The reforms, alongside the recent proliferation in non-contributory pension programs targeted at the poorest sectors (Bosch et al. 2013), can be regarded as the necessary implementation of measures intended to reduce both poverty in old age and pension inequality. All this marks an important departure from the approach to pension policy-making taken in the 1990s, which focused primarily on financial sustainability. Recent evidence indicates that economic inequality and old-age poverty can be reduced under mixed pension systems, and especially under the Chilean pension system reformed in 2008 (Forteza 2014; Otero 2013) Peru embarked upon a pension reform process in 2012 (see Valladares 2012), but the discussions centered on attempts to decrease administrative fees charged by pension fund administrators (administradoras de fondos de pensiones, AFPs) and insurance companies in the Private Pension System (Sistema Privado de Pensiones, SPP). An opportunity was missed to address distributive aspects and fiscal problems caused by competition between the National Pension System (Sistema Nacional de Pensiones, SNP) and the SPP. For example, in 2013, the actuarial deficit of the SNP was approximately 21% of Gross Domestic Product (GDP), which is to say that 21% of GDP in present value is required to be able to pay current and future pensions. Meanwhile, pension inequality has increased considerably in recent years as a result of the growing numbers of pensioners in the SPP. 12 Apuntes 78, First Semester 2016 / Olivera According to the National Household Survey (ENAHO), in 2007 pension inequality in the SPP – measured using the Gini coefficient – was 0.25; while in the SNP it was 0.20; and for pension-holders overall, 0.22.1 In turn, in 2013, pension inequality in the SPP increased to 0.45, while in the SNP it was only 0.21; and for pension-holders overall, the Gini was 0.27. This trend could continue due to the greater number of SPP affiliates set to retire in the coming years, since there is much greater pension disparity in this system than in the SNP. On this point, the lower inequality in the SNP is explained by the existence of minimum and maximum limits on pensions, while in the SPP the relationship between salaries and pensions is more direct. Of course, pension inequality in the SPP may be exacerbated by profitability, given that lower-income individuals contribute less frequently and therefore accumulate less resources to finance their pensions. Given the above, the structure of the current pension system (...truncated)