Peru will invite local and foreign pension providers to bid for new customers at an auction scheduled for mid-December, said Daniel Schydlowsky, the country’s chief financial regulator.
Companies from countries including Chile, Colombia and Brazil may participate in the bidding, he told reporters in Lima today. The provider with the lowest commission will win exclusive rights for two years to sign up Peruvians who want a private pension plan.
The first major change to Peru’s private pension system created 19 years ago will boost competition and cut fees by 30 percent, Finance Minister Miguel Castilla said in June. Legislation passed by Congress in July allows pension providers to outsource back-office functions such as accounting and centralize collections, which will lower operating costs and make it easier for new companies to enter the market, Schydlowsky said.
“This is a very a pro-market reform,” Schydlowsky said. “It’s improving regulation to ensure the market functions better with greater competition and with a more solid long-term future.”
The financial regulator estimates 30,000 people a month will take out pensions in Peru over the next two years, choosing between the state provider, known as the ONP, and four private fund administrators, known as AFPs. The AFPs have 5.1 million members and oversee 89.8 billion soles ($34.4 billion) in assets.
Prima AFP is the country’s largest pension fund by assets, followed by AFP Integra, AFP Horizonte and Profuturo AFP. Prima is owned by Credicorp Ltd., the country’s largest financial services group, while Integra was acquired by Colombia’s Grupo de Inversiones Suramericana last year. Horizonte is a unit of Spain’s Banco Bilbao Vizcaya Argentaria, while Profuturo AFP is a unit of Canada’s Bank of Nova Scotia.