Peru’s government is to postpone for a year a regulation that requires independent workers to make mandatory contributions to a private pension fund, Finance and Economy Minister Luis Miguel Castilla said.
The regulation had come into effect at the start of August, geared to all independent workers under the age of 40. However, it was criticized by some groups representing independent workers, as well as economists and opposition politicians.
The purpose of the regulation is ensure that more Peruvians have a pension when they retire. Castilla said that only 25 percent of Peruvians over 65 years old are in any form of pension system. This places an increasing pressure on government social programs. In fact, of 2.5 million Peruvians who have reached retirement age, close to 1.5 million do not have any form of pension, according to government statistics.
Castilla said that the new regulation, which will come into effect in August 2014, will have gradual contributions. In the first year, independent workers will make contributions of 2.5 percent of their monthly salary, while in the second year this will increase to 5 percent. It will increase to 7.5 percent in the third year and 10 percent in the fourth year.
The initial objective was for independent workers to begin contributing at least 7% of their income, graduating to 13% in the state pension system and to around 11% in the private pension fund.
Postponing the regulation give the government time to promote the benefits of pension funds to the public, the government said.