A significant legislative proposal has emerged in Peru's Congress, aiming to reverse the recently enacted pension reform and greenlight an eighth extraordinary withdrawal of funds from the Administradoras de Fondos de Pensiones (AFP). Spearheaded by Congressman José Luna Gálvez of Podemos Perú, the bill seeks to repeal Law No. 32123 and its subsequent regulations, responding to widespread public protests and a growing chorus of dissent, even from within the government itself.

The initiative comes at a critical juncture, with President Dina Boluarte and the Ministry of Economy and Finance (MEF) now signaling a willingness to review the pension reform, despite their initial backing and the Congress's own prior approval. This legislative move by Luna Gálvez proposes not only the repeal of the law modernizing the Peruvian pension system but also its accompanying decree, highlighting deep dissatisfaction with a system perceived as increasingly regressive.

If approved, the bill would permit affiliated workers in the Private Pension Fund Administration System (SPP) to withdraw up to four Tax Payment Units (UITs) – approximately S/ 21,400 – from their individual accounts. This potential withdrawal, coupled with the proposed elimination of mandatory contributions for individuals over 18 and independent workers, underscores the populist appeal of the proposal amidst economic hardship. The underlying argument is that the reform, by limiting withdrawals and guaranteeing AFP profits even in loss-making scenarios, has exacerbated social unrest and disillusionment with the pension system.

Key Context

Background and history: The new proposal aims to repeal Law No. 32123, a pension reform approved by Congress and regulated in September 2024. This reform introduced restrictions on withdrawing 95.5% of pensions for those under 40 and made contributions mandatory for individuals over 18 and independent workers. Public outcry over the reform's perceived negative impact and the government's subsequent regulation led to demands for repeal. Peru has seen seven extraordinary AFP withdrawals since 2020, raising concerns about the long-term sustainability of the pension system.
Related developments: President Dina Boluarte has expressed support for an eighth AFP withdrawal, contrasting with the MEF's opposition. Various political parties, including Fuerza Popular and Alianza para el Progreso, which previously supported the reform, are now criticizing its implementation and demanding changes or withdrawals.
Important connections: The project links pension fund performance to social welfare, citing over S/18 billion in losses for affiliates between 2022-2024 while AFPs reported net profits of over S/1.4 billion. It also references reports from the Inter-American Development Bank (IDB) and the International Labour Organization (ILO) on low pension coverage in Peru, alongside national poverty statistics from INEI, suggesting a systemic failure to provide adequate social security.

Impact Analysis

The potential approval of this bill would directly impact millions of Peruvian workers, providing immediate, albeit temporary, financial relief for those able to withdraw funds. However, it raises significant concerns about the long-term viability of the pension system. Continued withdrawals deplete the funds available for future retirement, potentially leading to widespread old-age poverty. Economically, large-scale withdrawals could destabilize financial markets, reduce investment capital, and negatively affect Peru's sovereign risk rating. The government faces a delicate balancing act between addressing immediate public demands and ensuring the future solvency of its social security framework.

Timeline

What happened: Recent protests against pension reform Law No. 32123 and its regulation. Congress previously approved the reform.
What's happening now: Congressman José Luna Gálvez presents a bill to repeal the reform and authorize an eighth AFP withdrawal. President Boluarte expresses support for withdrawals. The MEF and other institutions maintain opposition. The Congressional Economy Commission is scheduled to debate the proposals on September 17th.
What's next: Potential debate and vote in Congress on the proposed bill. If approved, the new withdrawal would be authorized. Continued discussion on the structural issues within Peru's pension system and the role of AFPs and the SBS.

Different Perspectives

José Luna Gálvez (Proponent): Argues the reform is regressive, harms workers, and that withdrawals are necessary for families facing economic crises and unemployment. Highlights AFP profits amidst affiliate losses.
President Dina Boluarte: Supports workers' right to access their own pension funds, framing it as a matter of individual choice and family welfare.
Ministry of Economy and Finance (MEF), BCRP, SBS: Strongly oppose further withdrawals, warning of severe negative impacts on pension system sustainability, capital markets, investor confidence, and long-term economic stability.
Economists (e.g., David Tuesta, Jorge González Izquierdo): Express concern that repeated withdrawals undermine the pension system, reduce future pensions, discourage investment, and increase old-age poverty, disproportionately benefiting those with more savings rather than the neediest.
Workers and Public: Many see AFP withdrawals as a crucial lifeline during economic hardship, unemployment, or for essential needs, reflecting a deep distrust in the pension system's ability to provide adequate future security.

What You Need to Know

A new bill in Peru seeks to repeal the recent pension reform (Law No. 32123) and allow an eighth AFP withdrawal of up to 4 UITs (approx. S/ 21,400).
The proposal comes amid public protests against the reform and conflicting signals from the government.
Proponents argue the reform is harmful to workers, while opponents warn of severe damage to the pension system and economy.
The Congressional Economy Commission will debate the issue on September 17th.
Between 2022 and 2024, AFP affiliates reportedly lost over S/18 billion while AFPs gained over S/1.4 billion.

Regional Perspective

This legislative proposal is uniquely Peruvian, reflecting a recurring pattern of public demand for AFP withdrawals that has shaped pension policy over the past few years. The current debate is intensified by the recent pension reform, which many perceive as tightening access to savings when economic conditions are dire. The political maneuvering, with different government branches and parties taking opposing stances, highlights the deep divisions and populist pressures influencing economic policy in Peru. The outcome will significantly impact the financial landscape and the retirement prospects of millions of Peruvians.

Why This Matters

The potential repeal of the pension reform and a new withdrawal could set a precedent for future pension policy, signaling a government more responsive to immediate public pressure than long-term financial stability.
It highlights a fundamental tension in Peru between providing immediate economic relief to citizens facing hardship and maintaining the solvency of crucial social security systems.
The story underscores the persistent public distrust in the pension system and the financial performance of AFPs, driven by perceived mismanagement and the impact of economic crises on individual savings.

What to Watch

The upcoming debate and vote in the Congressional Economy Commission on September 17th.
The stance of key political parties and their ability to rally support for or against the bill.
Statements and analyses from the MEF, BCRP, and SBS regarding the potential economic fallout of a new withdrawal.
Public reaction and potential for further protests depending on the outcome.

Analysis

The proposal to repeal Peru's recent pension reform and permit an eighth AFP withdrawal is a complex maneuver driven by socio-economic pressures and political opportunism. While proponents frame it as a necessary measure to alleviate the suffering of Peruvian families, critics, including key economic authorities, warn of catastrophic consequences for the pension system and the national economy. The significant losses reported by AFP affiliates contrasted with AFP profits provides potent ammunition for populist arguments, but overlooks the fundamental purpose of long-term savings. The political landscape, marked by shifting alliances and a willingness by some parties to backtrack on reforms they previously supported, suggests that immediate public sentiment may outweigh prudent fiscal management. The upcoming congressional debate will be a critical juncture, revealing the extent to which political expediency will dictate the future of Peru's retirement security.