Peru has introduced a new private sector early retirement regime for older workers who have been unemployed for 12 months or more.

By: José Antonio Valdez and Lucianna Polar

Firm: Estudio Olaechea

On 3 May 2019, the ‘Law establishing a special early retirement regime for the unemployed in the private pension system’ (Law 30939) was published in the Official Gazette ‘El Peruano’. The main provisions of the Law are set out below.

At the time of applying for the benefit, men must be at least 55 years of age and women 50.

To request it, they must have been unemployed for 12 consecutive months or more, and prove the date of their employment ceased, with a document that indicates the specific date.

If individuals have received income from self-employment (known as ‘fourth category’ income) during the 12-month period of unemployment, the total value of this income must be less than or equal to the value of seven Tax Reference Units.

This special regime gives beneficiaries the right to redeem the Recognition Bonus, which is a benefit that is granted to affiliates that contributed to the ONP (‘Oficina de Normalizacion Provisional’, the public body responsible for the state pension system in Peru) and moved their pension fund to an AFP (‘Administradora de Fondos de Pensiones’, private pension administrator) when it was created. Through the Recognition Bonus, the contribution made by the affiliate to the AFP is returned. Under the new Law, if an employee retires early as a result of unemployment, he or she will have to wait two years from the time they make the request for special retirement to redeem the bonus early (previously the wait was nine months). If the individual retires at the normal legal age, the Recognition Bonus can be redeemed at the age of 65.