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Pay as you Go System versus Fully Funded Pension in Peru

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  • Jorge B. Guillén
  • Ruben Mosqueda

Abstract

The following paper analyses the sustainability of the Peruvian ''Pay as You Go System'' which is provided by the Government. In Peru, the ''Pay as you Go System'' coexists with Private Pension Funds or ''Fully Funded Pension''. Sometimes both systems compete with each other with advantages and disadvantages between them. We found that ''Pay as You Go System'' cannot be sustainable over a long period of time. In addition, based on a comparative analysis of advantages and disadvantages, we propose some recommendations to make Private Pension Funds (Fully Funded Pension) the best alternative to Pay as You Go System. ***** Este trabajo analiza la sostenibilidad del sistema pensional colectivo implementado por el gobierno peruano. En Perú, este sistema coexiste con el de fondos privados de pensiones o fondo individual. En algunos casos, estos dos sistemas compiten entre sí, con sus ventajas y desventajas entre ambos sistemas. Según nuestros hallazgos, el sistema pensional de reparto colectivo de pensiones no es sostenible en un largo plazo. Asimismo, sobre la base de un análisis comparativo de las ventajas y desventajas entre ambos sistemas, se formulan algunas recomendaciones para que los fondos privados de pensión (Sistema Individual) se conviertan en la mejor alternativa al sistema pensional colectivo.

Suggested Citation

  • Jorge B. Guillén & Ruben Mosqueda, 2013. "Pay as you Go System versus Fully Funded Pension in Peru," Revista Ecos de Economía, Universidad EAFIT, June.
    • Handle: RePEc:col:000442:011608
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    File URL: http://publicaciones.eafit.edu.co/index.php/ecos-economia/article/view/2156/2151
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    References listed on IDEAS

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    1. Rafael Rofman & Leonardo Lucchetti & Guzmán Ourens, 2010. "Pension Systems in Latin America: Concepts and Measurements of Coverage," Documentos de Trabajo (working papers) 0510, Department of Economics - dECON.
    2. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
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    1. Besime ZIBERI & Rrezarta GASHI & Luljeta HALITI & Audenta HALITI, 2021. "The Perception Of Employees On The Mandatory Pension Savings In Case Of Kosovo," Management and Marketing Journal, University of Craiova, Faculty of Economics and Business Administration, vol. 0(1), pages 98-107, May.

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    More about this item

    Keywords

    Fully Funded; Pay as You Go; Sustainability;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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