Peru : reforming the pension system

This paper identifies the main areas of pension reform that Peru should address in order to complement its optional capitalization scheme introduced in 1992. The guiding principle of the remaining changes is the need to adopt a unified pension regime. Such unification is desirable for both equity and efficiency reasons. A central theme of the paper is therefore to provide a framework for selecting a unified pension system. This framework allows a critical assessment of the new draft law for private pensions. In addition, an estimate of pension liabilities is provided to highlight the importance of moving towards a defined-contribution regime, but also to quantify the fiscal effect of some of the policy reforms that are being discussed in Peru, such as adopting a minimum pension guarantee.