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Christoph Freudenberg and Mr. Frederik G Toscani

arrangement are unlikely to exceed 0.2 percent of GDP per year over the long-term. Key Numbers Peru (2017) Population : 31.8 million, Population 15–64 : 20.9 million, Population 65 and over : 2.3 million Labor Force (2016) : 16.9 million , Employment (2016) : 16.2 million SNP Affiliates : 4.5 million, SPP Affiliates : 6.6 million SPP Assets under Management : 47.7 billion USD (ca. 22 percent of GDP) SNP Expenditures : 1% of GDP, SNP Contributions : 0.5% of GDP SNP State Budget Transfers : 0.2% of GDP, SNP Other Revenues : 0.3% of GDP SNP Reserve Fund

Christoph Freudenberg and Mr. Frederik G Toscani
Past reforms have put the Peruvian pension system on a largely fiscally sustainable path, but the system faces important challenges in providing adequate pension levels for a large share of the population. Using administrative microdata at the affiliate level, we project replacement rates in the defined benefit (DB) and defined contribution (DC) pillars over the next 30 years and simulate the impact of various reform scenarios on the average level and distribution of pensions. In the DB pillar, the regressive minimum contribution period should be re-thought, while in the DC pillar a broadening of the contribution base and/or an increase in contribution rates would help increase replacement rates relative to the baseline forecast of 25-33 percent. A higher net real rate of return than assumed in the baseline would also have a significant positive impact. In the medium-term, labor market reform to tackle informality, and a broad pension reform to restructure the system and avoid competition between the DB and DC pillars should be a priority. Given low pension coverage, having a strong non-contributory pillar will remain important for the foreseeable future.
Christoph Freudenberg and Mr. Frederik G Toscani
International Monetary Fund. Western Hemisphere Dept.

low projected replacement rates . Detailed administrative microdata for SPP and SNP affiliates show that contribution densities are only 40 percent in the SPP and 34 percent in the SNP. In other words, affiliates contribute for 4 to 5 months out of 12 months per year on average over their working life. High income households have substantially higher contribution densities, with the top income quintile four times as likely to reach the minimum 20-year contribution period in the SNP as the bottom quintile. Using these contribution densities, staff projected

International Monetary Fund. Western Hemisphere Dept.
Peru has been one of the top performers in Latin America since the turn of the century: robust growth has helped close the income gap with the largest regional economies and reduce poverty significantly. Last year, however, growth was subpar and the poverty ratio increased. While high commodity prices are an important tailwind, the economy is facing domestic headwinds. The Odebrecht case led to the resignation of President Kuczynski, and the new cabinet has moved quickly to implement various measures and request special legislative powers from Congress. The authorities have also been facing the challenge of rebuilding infrastructure following the extreme weather caused by El Niño in 2017.