[JURIST] The Congress of Peru [official website, in Spanish] on Wednesday approved a bill that would reform the country’s private pension system. The bill, which will increase the number of workers while lowering the fees for contributors, was passed with a 11-10 vote [Reuters report; text, PDF, in Spanish] with one abstention. Peru’s current four private pension funds, which amounts to $30 billion in deposits representing 20 percent of the country’s GDP, has been criticized for including only about 30 percent of all workers while maintaining high fees. The reform will lower the fees, which are currently about two percent of monthly salaries, and increase the number of workers included in the funds by 40 percent. The fees charged for the funds will be based on assets under management. The reform also aims to increase competition and will require independent workers earning 1.5 times the monthly minimum wage to contribute ten percent of their income to one of the four pension funds.

Wednesday’s approval of the reform to the country’s pension fund was the first in 19 years. Chile had reformed [NYT report] its pension fund system under its president Michelle Bachelet [Britannica profile; JURIST news archive] in 2008 after a previous reform in 1981. The pension system faced difficulties including a large number of workers due to its high administrative costs. The reform had proposed, among others, a replacement of the minimum pension and the Pensiones Asistenciales by a tax-funded solidary pension system (SPS) which included all citizens older than 65 years who live in the country for at least 20 years but do not have a private pension. Mexico had also reformed [World Bank report] its pension system in 1997 remodeling it after the Chile’s reform of 1981 based on a multipillar approach that includes redistribution, mandatory individual savings accounts and competitive pension fund management as well as voluntary savings.