Resolution SBS No. 8962-2009: Modifies Titles VII and V of the SPP Norms Compendium Establishing Conditions for Programmed Withdrawal with Bonus

Lima, July 17, 2009 Resolution S.B.S. No. 8962-2009

The Superintendent of Banks, Insurance and Private Pension Fund Administrators

CONSIDERING:

That, by Supreme Decree No. 054-97-EF, the Single Text of Ordered Norms (TUO) of the Law of the Private System for the Administration of Pension Funds was approved;

That, by Supreme Decree No. 004-98-EF, the Regulation of the aforementioned Single Text of Ordered Norms was approved;

That, in accordance with the Third Final and Transitory Provision of the Regulation of the Law, the Superintendence is empowered to issue the complementary operational norms necessary for the proper functioning of the Private System for the Administration of Pension Funds;

That, Title VII of the Compendium of Regulatory Superintendence Norms of the Private System for the Administration of Pension Funds (SPP), approved by Resolution No. 232-98-EF/SAFP and its amendments, contemplates the regulation of the benefits granted within the Private System for the Administration of Pension Funds (SPP);

That, the aforementioned title establishes the basic modalities under which the granting of retirement, disability, and survivorship benefits can be made effective, as well as the method of calculating pensions under the different modalities;

That, in this regard, Article 16 of the aforementioned norm establishes that in the case of Programmed Withdrawal, monthly withdrawals will be determined by dividing the corresponding annuity by twelve (12), and the payment of the annuity will be made in twelve (12) monthly installments;

That, in the case of Temporary Annuity with Deferred Life Annuity, Article 36 of the aforementioned norm establishes that the first will be paid in twelve (12) monthly installments, determining the monthly withdrawal by dividing the calculated amount of the annual Temporary Annuity by twelve (12);

That, this Superintendence through Circular No. AFP-083-2007 has authorized insurance companies the possibility of marketing life annuities with bonus, so it is necessary to adjust the offer conditions of the products granted by the AFPs, so that affiliates have the possibility of comparing the pension offers they receive in quotation processes considering the effect of the payment of two (2) annual bonuses in the Programmed Withdrawal modality and in the Temporary tranch of the Temporary Annuity with Deferred Life Annuity;

That, therefore, it is necessary to incorporate Subchapter I-A into Chapter II of Subtitle I of Title VII of the Compendium in order to establish the conditions of Programmed Withdrawal with Bonus;

That, likewise, with the aim of considering fourteen (14) payments in the temporary tranch of the Temporary Annuity with Deferred Life Annuity, it is necessary to modify Article 36 of the aforementioned Compendium;

That, complementarily, it is necessary to modify Article 35 of the aforementioned title, in order to consider as the expression of the calculation of the pension under the temporary annuity with deferred life annuity modality, the months corresponding to the accrued periods of pension under the temporary tranch, so that distortions in the respective pension payment amounts are not generated;

That, by virtue of the aforementioned modifications, it is necessary to update the definitions related to the "base pension level", applicable to Programmed Withdrawal, and "basic amount for pension contributions", in order to better express their ultimate purpose;

That, on the other hand, it is necessary to strengthen the mechanisms for adequate advice and guidance by the AFPs to affiliates who initiate any procedural matter of a previdential nature in the SPP, so that the administrators can objectively accredit the diligence required in terms of clear and explicit information regarding the scope, conditions, alternatives, requirements and deadlines applicable to the procedures that could be carried out through their various attention channels;

That, likewise, it is necessary to limit the degree of discretion of insurance companies in the constitution of additional contributions, originated by changes in the type of pension fund upon the occurrence of accidents of disability and survivorship under the coverage of previdential insurance, in order to promote a trajectory of stability in the formation of prices for the administration of disability, survivorship and burial expenses risks in the SPP;

That, additionally, it is necessary to strengthen the transparency mechanisms of the previdential industry in aspects related to multi-funds and the choice or change of fund type by workers who join the SPP, so as to ensure a base scenario of information regarding the effects, implications and benefits of belonging to a certain type of pension fund, based on the particular risk tolerance profiles that affiliates may have throughout their working cycle as participants of the SPP;

That, on the other hand, it is convenient to establish clarifications regarding the procedures for transferring funds abroad, in the case of those affiliates who belong to regimes under mandatory pillars of individual capitalization, so as to guarantee an adequate channeling of previdential resources, preserving the long-term purpose of the savings made;

That, in order to collect the opinions of the general public regarding the proposals for modification to the SPP regulations, the pre-publication of the draft resolution on the matter was ordered on the electronic portal of the Superintendence, under the provisions of Supreme Decree No. 001-2009-JUS;

Being in accordance with the opinion of the Adjunct Superintendencies of Private Pension Fund Administrators and of Legal Advice; and,

In exercise of the powers conferred by numeral 9 of article 349 of the General Law of the Financial System and of Insurance and the Organization of the Superintendence of Banks and Insurance, Law No. 26702 and its amendments, and subsection d) of article 57 of the

Single Text of Ordered Norms of the Law of the Private System for the Administration of Pension Funds, approved by Supreme Decree No. 054-97-EF;

RESOLVES:

Article First.- Substitute Article 18 of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, referred to Benefits, in the following manner:

"Article 18.- Basic Pension Amount (MBP). The affiliate to the SPP who does not qualify for the minimum pension benefit in the SPP may opt for the pension that results from the calculation process of this pension modality or for it to be adjusted until it reaches the basic pension amount (MBP) determined by the Superintendence, provided that the originally calculated pension is lower than the MBP.

The AFP, at the time when the affiliate or their beneficiaries receive section II or IV of Annex 1, 7 or 8 of this title, as applicable, must provide a declaration indicating the scope of such alternative, considering that, if they opt to adjust the pension amount to the aforementioned basic amount, the pension they receive, as well as the benefits derived from it, such as coverage under the Health Benefits Regime, will have a temporary character that will be based on the balance of the Individual Capitalization Account. This declaration must be signed by the applicant in original and copy, as a sign of conformity.

In case they have not opted to adjust the pension to the MBP, the pension will be paid monthly from the balance of the CIC until the moment when the balance of said account is lower than the Minimum Balance Amount for pension contribution (MMS) provided in Article 52 of this Title, in which case, they may opt to continue receiving the pension with or without adjustment to the MBP or, alternatively, request the delivery of the entire balance of the CIC in a single lump sum, proceeding to the closure of the accounts, subject to complementary provisions on the matter.

In cases where the pension has been opted to be adjusted to the MBP, the same level of pension will be granted throughout the period, and annual recalculation based on the variation of the CIC balance will not apply. Regarding pensioners who receive programmed withdrawal with bonus, the basic pension amount will be readjusted by multiplying it by the factor 12/14, corresponding to the two monthly installments in the months of July and December."

Article Second.- Incorporate as subchapter I-A of Chapter II of Subtitle I of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, referred to Benefits, the following articles:

"SUB CHAPTER I-A PROGRAMMED WITHDRAWAL WITH BONUS

Article 19A.- Definition. Programmed Withdrawal with Bonus is understood as a variant of the Programmed Withdrawal modality referred to in Article 16 of this title, which has the particularity of considering two (2) additional annual payments equivalent each to the value of the monthly pension. The payment for the concept of bonus is granted in the months of July and December, on the same occasion that the pension payment is made. Being a variant of Programmed Withdrawal, the general aspects of said modality are the same for Programmed Withdrawal with Bonus with the particularities indicated in the following articles.

Article 19B.- Characteristics. The pension modality of Programmed Withdrawal with Bonus, in addition to the characteristics presented by Programmed Withdrawal, has the following particularities: a) It is only applicable for cases of definitive pension. b) The payment of two (2) annual bonuses persists even if the basic pension amount referred to in Article 18 has been opted for.

Article 19C.- Determination of Monthly Withdrawals. The monthly withdrawals that, by concept of Programmed Withdrawal with Bonus, affiliates or beneficiaries carry out, are made in the following manner: a) Retirement and disability pension: In both cases, once the annuity has been calculated according to the procedure described in Article 15, the AFP must determine the monthly withdrawal by dividing the annuity by fourteen (14), at the choice of the applicant. b) Survivorship pension caused by an active affiliate: In said case, the annuity will be determined according to what is stated in Article 15, excluding from the required capital the payment of the pension corresponding to the affiliate. The annuity thus determined will be paid in fourteen (14) monthly installments, at the choice of the applicant, corresponding to each beneficiary the amount resulting from applying the formula indicated in Article 16 and where the denominator corresponds to the number of monthly installments that will be paid per year, that is, fourteen (14). c) Survivorship pension caused by a passive affiliate: In said case, the monthly withdrawal will be determined in accordance with the preceding subsection. However, the balance to be considered for the calculation of the annuity will be that of the CIC from which the affiliate was making withdrawals. The payment of the two (2) additional monthly installments will be made in the months of July and December."

Article Third.- Substitute Article 35 of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, referred to Benefits, in the following manner:

"Article 35.- Calculation of Temporary Annuity. Under this pension modality, the Temporary Annuity presents the following calculation formula: a) Retirement and disability pension: RT = (SCIC-M) * [ (1+i)^m - (1+i)^q ] / [ (1+i)^m - 1 ] * (1+i) / (12*i)

Where: RT = Is the Monthly Temporary Annuity. SCIC = Is the capital for pension, as applicable on the quotation date. M = Amount transferred by the Deferred Life Annuity contract (includes burial expenses). i = Is the monthly interest rate equivalent to the annual interest rate referred to in Article 19 of Title VII. m = Is the number of years the Temporary Annuity lasts. q = Is the number of months accrued of the Temporary Annuity

b) Survivorship pension RT = (SCIC-M) * [ (1+i)^m - (1+i)^q ] / [ (1+i)^m - 1 ] * (1+i) / (12*i) * fj

Where: RT = Is the Monthly Temporary Annuity. SCIC = Is the capital for pension, as applicable on the quotation date. M = Amount transferred by the Deferred Life Annuity contract. (includes burial expenses) i = Is the monthly interest rate equivalent to the annual interest rate referred to in Article 19 of Title VII. m = Is the number of years the Temporary Annuity lasts. q = Is the number of months accrued of the Temporary Annuity fj = Percentage on the monthly remuneration corresponding to beneficiary j as established in Article 85 of this Title (Percentages of survivorship pension and order of precedence). The percentages of beneficiaries indicated by the symbol f, in the previous formula will be modified proportionally according to what is established in Article 85 of this Title."

Article Fourth.- Substitute Article 36 of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, referred to Benefits, in the following manner:

"Article 36.- Payment of Temporary Annuity. The Temporary Annuity will be paid in twelve (12) monthly installments, with the exception of those cases in which the affiliate had contracted a Temporary Annuity with Life Annuity with bonus, in which case the temporary annuity will consider fourteen (14) monthly installments per year. For this purpose, the AFP must determine the monthly withdrawal by dividing the calculated amount of the annual temporary annuity by twelve (12) or fourteen (14), as applicable. The payment of the two (2) additional monthly installments, if applicable, will be made in the months of July and December."

Article Fifth.- Substitute Article 40 of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, referred to Benefits, in the following manner:

"Article 40.- Requirements for retirement pension. Those affiliates who meet any of the following requirements have the right to receive a retirement pension: a) Meet the legal age: Be affiliated with an AFP and be at least 65 years of age, completed in months and days, at the time of presenting the retirement pension application. b) Meet the requirements to access early retirement: Be affiliated with an AFP and, having not met the condition established in subsection a), obtain a pension equal to or greater than 50% of the average of remunerations received and rents declared during the one hundred twenty (120) months prior to the presentation of the retirement pension application, duly updated. Likewise, have a contribution density of at least sixty percent (60%) with respect to the last one hundred twenty (120) months. It will be understood that the average of the remunerations received and rents declared during the last one hundred twenty (120) months refers to that calculated on the basis of the remunerations and income effectively received by the affiliate prior to the presentation of the application. Such remunerations and income will refer to those registered as insurable remuneration for the purpose of paying contributions, and, in the case of those months in which the dependent affiliate was not incorporated into the SPP, the pay stubs must be taken into consideration. In the absence of these, the dependent affiliate may substantiate the aforementioned remunerations through a sworn declaration of the employer or a withholding certificate of the Income Tax of Fifth Category. The independent worker will substantiate their income through the Withholding Certificate of the Income Tax of Fourth Category or the Sworn Declaration of Taxes. Additionally, the Superintendence through a general instruction may authorize the presentation of other supporting documents. For the purpose of accessing the pension for early retirement, the evaluation of the pension will consider as the applicable modality that corresponding to Programmed Withdrawal.

The updating of remunerations and rents is carried out based on the Consumer Price Index of Metropolitan Lima published by INEI, or the indicator that substitutes it. In the case of independent workers, in order to maintain concordance with what is established in Title V of the Compendium, for the determination of the average remuneration as well as the contribution density, only those contributions that are paid within the month or period that corresponds will be taken into account. Contributions that respond to regularization (payments made after the month or period that corresponds, according to their accrual) will only have the purpose of accumulating funds in the balance of the CIC of mandatory contributions. Exceptionally, in the case of early retirement, affiliates may regularize up to twenty-four (24) months in order to complete those periods where, having the condition of independent worker, they have not registered contributions, which will only be valid for the calculations of contribution density and average remuneration, insofar as they are carried out based on the Minimum Vital Remuneration at the date of payment. In case more than twenty-four (24) months are regularized, those that correspond will be taken into account for these effects, according to the order of greater antiquity."

Article Sixth.- Substitute Article 52 of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, according to the following text:

"Article 52.- Minimum balance amount for pension contribution (MMS). The request for pension contribution will only proceed in those cases where the capital for pension results greater than the value of a pension annuity determined by the Superintendence through a general provision. If this condition is not met, the affiliate may opt to receive a pension under the conditions provided by Article 18 or receive as pension the total accumulated balance of the CICs plus the updated value of the recognition bonus, if applicable, proceeding, when there are no collection contributions or pending recognition bonus requests, to the closure of the respective accounts."

Article Seventh.- Substitute the first paragraph of Article 54 of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, according to the following text:

"Presentation of Quotations. Article 54.- The pension contributions of the AFPs and insurance companies will be sent under the electronic communication platforms, indicating the name and CUSPP of the applicant, number of the pension application as well as complementary information established by the Superintendence. Once the information is received, the AFP will proceed to download the results only on the date and from the hour of the appointment reported through said platform, delivering to the affiliate and/or beneficiary the record of the quotations presented under Section IV of the Retirement Pension Application."

Article Eighth.- Substitute the first paragraph of Article 55 of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, referred to Benefits, in the following manner:

"Once the procedure indicated in the previous Article has concluded, the affiliate must opt for one of the presented quotations, having for this a period of one day from its delivery to the applicant or, in default thereof, a period that does not exceed the validity of the quotations referred to in Article 54A. The AFP must leave a record in the Act of Presentation of Quotations of the following text: "Due to variations in the value of the AFP quota or, the exchange rate, between the date of quotation, subject of the choice, and the date of transfer of funds to the insurance company, the amount of the pension to be received may be different from that registered in this act."

Article Ninth.- Substitute Article 78A of Title VII of the Compendium of Regulatory Superintendence Norms of the SPP, according to the following text:

Article 78Aº.- When an Application for Disability Pension has been filed. In the case of affiliates who initiate the Disability procedure, the activation of the change process, exclusively for mandatory contributions, to Fund Type 1 occurs with the consent given by the Administrator to the Disability Pension Application (Transitional), regarding access to coverage for compliance with contribution payments, and the resources in the account will be transferred within five (5) days following that date. In this regard, with the definitive ruling made by the insurance company that administers the risks of disability, survivorship, and burial expenses, regarding the coverage condition of the claim, the following will be proceeded with:

a) No coverage: The Fund will remain in Fund Type 1, unless the affiliate decides, under the conditions established for the recalculation of Programmed Withdrawal pension, to change Fund Type. b) Postponed coverage: It will be operated in the same manner as in the "No Coverage" cases.

The transfer of voluntary contributions with and without pension purpose will be made to the Fund in which the mandatory contributions are located, once the pension capital has been determined, and to the extent that the affiliate had decided to incorporate them into said capital.

Article Ten.- Substitute the second paragraph of Article 105Aº of Title VII of the Compendium of Regulatory Supervision Norms of the SPP, according to the following text:

"In the event that survivorship procedures for an active affiliate are initiated directly, the change to Fund Type 1 will be activated with the signing of Section II of the Survivorship Pension Application by the beneficiaries or a representative designated by them, so that the change is made within five (5) days of the signing of said section."

Article Eleven.- Substitute Sections III, IV, and V of Annexes 1, 7, and 8, as well as Section I of Annex 3 of Title VII of the SPP Norms Compendium attached to this resolution, and which are published on the electronic Portal of this Superintendence (www.sbs.gob.pe), in accordance with what is established in Supreme Decree No. 001-2009-JUS.

Article Twelve.- The Superintendence, through general provision, will indicate the maximum deadline for the adaptation of the pension estimation software of the Administrators, adjusting to what is established in this device, within the framework of what is indicated in Circular No. AFP-085-2007.

Article Thirteen.- Incorporate as Thirty-Second, Thirty-Third, and Thirty-Fourth Final and Transitional Provision of Title VII of the Compendium of Regulatory Supervision Norms of the SPP, the following texts:

"Thirty-Second.- Applicable treatment for affiliates who are receiving Programmed Withdrawal pension. Affiliates who, on the date of entry into force of Resolution SBS No. 8962-2009, are receiving definitive pension under the Programmed Withdrawal modality, will have the possibility of opting for Programmed Withdrawal with Gratuity. For this effect, the exercise of said option will materialize through the procedure provided for the Change of Pension Modality, opportunity at which the affiliate must indicate their will to contribute as an obligatory product the Programmed Withdrawal with Gratuity. Likewise, for the purposes of the one-time change of pension modality that an affiliate receiving a pension under programmed withdrawal can make before the AFP, as referred to in Article 13º of this title, this will only be considered when the change is made towards a modality with a life annuity granted by an insurance company. Changes to a programmed withdrawal with gratuity are not subject to any restriction insofar as they are defined as a variant within the modality of programmed withdrawal that the SPP grants."

"Thirty-Third.- Advice and guidance to the affiliate. The AFPs are obligated to advise and guide both affiliates who initiate any pension-related procedure, as well as their pensioners and/or beneficiaries, regarding the scope, conditions, alternatives, requirements, and deadlines applicable to the type of procedure they are carrying out within the SPP. The Administrator, based on the regulations issued by the Superintendence, must implement objective and verifiable mechanisms of advice and guidance that guarantee that the affiliate or their beneficiaries have been informed clearly and explicitly regarding the scope, conditions, alternatives, requirements, and deadlines applicable to the type of procedure they are undertaking, placing special emphasis on those elements whose lack of knowledge could cause them harm at the pension or general benefits level and with the aim of accrediting the diligence of the case. The Superintendence, upon a complaint filed by an affiliate, will require the AFPs to demonstrate objectively the referred diligence required, with the purpose of establishing the existence or not of an infraction subject to sanction.

"Thirty-Fourth.- Change of Individual Capitalization Accounts of affiliates with insurance coverage. The Individual Capitalization Accounts of those affiliates who have insurance coverage and who were subject to the change from Fund Type 1 to Fund Type 2, by virtue of the decision of the insurance company that administered the pension risks, must return to Fund Type 1, within the deadline of five (5) business days of entry into force of Resolution SBS No. 8962-2009."

Article Fourteen.- Substitute the first and second paragraphs of Article 14º of Title V of the Compendium of Regulatory Supervision Norms of the SPP, referred to Affiliation and Contributions, in the following manner:

"Article 14º.- Distribution of copies of the affiliation contract. Opportunity. The AFP will deliver to the affiliate the copy of the affiliation contract that corresponds to them, once the Superintendence has assigned them the CUSPP, within four (4) days of having received it. Within the same deadline, the AFP must remit to the employer, when applicable, a copy of the affiliation contract so that the latter proceeds to make the withholding of contributions and to make the respective payments to the AFP. The aforementioned deadline will be eight (8) days in the case of affiliates and employers, as applicable, residing in localities different from the provinces of Lima and Callao. At the same time that the AFP delivers the contract, it must provide the affiliate with an informational booklet that will contain the relevant aspects of the multi-funds and of the choice or change of the type of pension fund of their preference, whose content will be determined by the Superintendence."

Article Fifteen.- Incorporate as a second paragraph of Article 37-P of Title V of the Compendium of Regulatory Supervision Norms of the SPP, referred to Affiliation and Contributions, the following text:

"Persons who incorporate into the SPP may request the choice of the type of pension fund of their preference with the signing of the form contained in Annex No. II-B, from the third month of accrual in the AFP in which they have affiliated."

Article Sixteen.- Substitute the last paragraph of Article 119º of Title V of the Compendium of Regulatory Supervision Norms of the SPP, referred to Affiliation and Contributions, with the following text:

"Likewise, the AFPs must establish information and dissemination actions for their affiliates independently regarding the contributions they make to the SPP, with the effect of avoiding harm in the contribution trajectories of said workers. To this end, they must register in the format of Annex XXII, a seal or note that informs the affiliates of the following:

• the value of the Current Minimum Vital Remuneration (RMV) on the basis of which they must make contributions to the AFP;
• the effects on the loss of insurance coverage that derive in case regularity is not maintained in the payment of contributions above the level of said minimum remuneration;
• the effects on the non-access to the benefits of an early retirement, in case the payment of mandatory contributions is not made within the month or following period that corresponds to their accrual.

Article Seventeen.- Substitute the second paragraph and incorporate the third paragraph in the twentieth final and transitional provision of Title V of the SPP Norms Compendium, referred to Affiliation and Contributions, under the following text:

"In those cases where, in accordance with what is established in the first paragraph of Article 167º of this title, it corresponds to make the transfer to an entity operating pension funds under administration of individual capitalization accounts and that, by legal and/or regulatory provisions of the destination country, it is expressly established that it is not possible to receive funds, the affiliate may instruct the local AFP to effect the transfer of the balance of their individual capitalization account to a personal account of a bank of the country of origin or from abroad. The instruction of the affiliate to the local AFP set forth in the previous paragraph will not be applicable in the case of those countries that, having individual capitalization regimes of mandatory pillar, do not have their normative procedures for the transfer and/or receipt of pension funds by countries from abroad regulated, with the exception of those affiliates who, at the time of presenting a transfer request, meet the requirements to access a old-age pension or retirement in the pension system of the destination country."

Article Eighteen.- This resolution will enter into force from the day following its publication in the Official Newspaper El Peruano, with the exception of articles second, fourth, fifth, eleventh, and sixteenth, which will enter into force from the first business day of the month following their publication.

Register, communicate, and publish.

FELIPE TAM FOX Superintendent of Banking, Insurance, and Private Pension Fund Administrators