The Peruvian Pension Reform: Ailing or Failing?*
This chapter analyzes pension reform in Peru. Peru's reform introduced private savings accounts while maintaining a fiscally unsustainable public pillar that must eventually be fixed. A number of factors led to the slow acceptance of the new system, including the fact that workers had more incentive to remain in the old PAYGO system, which offered a lower contribution rate, a lower retirement age, and a minimum pension guarantee. However, eventual adjustments allowed the new system to compete more effectively for workers. The performance of the Peruvian system with respect to investment, fees, competition, and coverage is analyzed, and it is argued that reducing political interference is crucial to its future success.
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