The Impact of the COVID-19 Pandemic on the Future Pensions of the Peruvian Pension System

Abstract

We study the effects of the COVID-19 pandemic and the pension policy response on the private and public pension systems of Peru. We find that the policies allowing early withdrawals from the private pension balances imply a significant reduction in expected pension wealth by about 40 people, yet there are important heterogeneous effects: the losses are larger for males, for affiliates at the bottom of the distribution of income or pension wealth, and for older people as they have less time to rebuild their pension pots. We detect that the excess of mortality due to the pandemic will reduce the actuarial net liability of the public pension system by about 2.4 percent, even after accounting for new survival pensions and a drop in contributions. The effect is largely driven by savings due to the anticipated deaths of pensioners. Moreover, a new set of reduced pension benefits implemented in the public pension system during the pandemic could cost about 4 percent of the actuarial net reserve.

Measuring Financial Sustainability and Social Adequacy of the Italian NDC Pension System under the COVID-19 Pandemic

“…Ref. [18] studied the effect of COVID-19 on the Peruvian pension system. They found that the extra mortality due to the pandemic will lessen the system's actuarial liabilities.…”

The long-term scars of Peru’s COVID-19 policy response on pension security

“…Finally, in the third type of policies introduced, the government aimed at reactivating the economy by setting soft loan schemes for firms and payroll subsidies. For more a more detailed overview on these policies, see Olivera (2021) and Olivera and Valderrama (2022).…”

“…In any case, even if one could accept the first three extraordinary pension fund withdrawals because they were set up in the onset of the pandemic in a context of extreme uncertainty, the following three policies were unnecessary and unsound. A recent study by Olivera and Valderrama (2022) have found that the first five withdrawal policies may imply a drop of about 40% in the pension wealth of the affiliates. Furthermore, the expected losses are larger among the older and poorer affiliates.…”