ACAP - The American and Canadian Association of Peru

Mes 2006

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April 2005

Money Matters
AFP's for Expats
By Carlos Vega Cumberland

Editor's Note: Carlos Vega is an ACAP member and an investment broker. He will respond to particular concerns of readers of The ACAP Newsletter about his column or other financial matters at info@cvc-consulting.com.

I have heard recently from several expatriate workers employed in Peru who are paying into the Peruvian private pension system (AFP), but are not sure how to transfer their money out of Peru when they move on to pursue work in another country or return home to retire. If this applies to you, or somebody you know, listen up, you are dealing with a bureaucracy, and like bureaucracies all over the world, you need to fight paper with paper.

First, let's take a closer look at who we are dealing with:

Private pension fund companies (AFPs) operate within the Peruvian private pension fund system, which is a personal capital gain system in which the working class makes mandatory payments into a personal account called an individual capitalization account. These accounts are protected by law against embargo because they are established to provide a pension after retirement.

The mandatory amount paid by the affiliates accumulates and compounds according to the profits generated as a result of the investment by the AFP's. The sum of the individual accounts constitutes the pension fund administered by the AFP's, which is invested in diverse local financial instruments authorized by law.

Leaving Peru? Here is what you need to do.

According to Law No. 27883, regulated by decree SBS No. 560-2002, there are various requirements that expat affiliates must fulfill in order to have their money invested in the AFP transferred abroad when they leave Peru.

Prerequisite: You must have been in a pension fund system outside Peru for a minimum of 36 months, prior to or after having left Peru.

Documentation: Before the AFP provides the affiliate with a “Preliminary Record of Agreement to Transfer Funds Outside Peru,” the affiliate must submit the AFP a “Request to Transfer of Funds Outside Peru,” accompanied by the following documentation:

•	In the case of an employee, a copy of your work certificate issued by your last employer in Peru, clearly stating the termination of employment.
•	Legalized copy of the document issued by the Peruvian Immigration that authorizes your definite departure of the country and orders the termination of your resident visa.
•	Copy of your Passport.

Requirements for Approval: The following documents must also be submitted to the AFP:

a.	Document issued by the non-Peruvian pension entity accrediting that you have been contributing for a minimum of 36 months prior to or following your departure from Peru. Such document must specify if the pension fund operates under a handout or individual account system.
b.	Document in which the non-Peruvian institution recognizes that this organization provides coverage against aging risks or retirement.
c.	Name, account number and address of the bank or financial institution abroad that will receive the transfer of the funds.
d.	Account statements of the affiliate from the non-Peruvian institution listing all the payment records. This applies only to those who have been paying in Peru and abroad simultaneously.

All supporting documents that accredit residency outside Peru must be legalized by the Peruvian Consulate in the country of residence. Furthermore, all the documents must be in Spanish, or officially translated into Spanish.

Additionally, if the affiliate has dual citizenship, the process must be carried out considering the affiliate's preference. This means that according to the nationality chosen by the affiliate (Peruvian or Foreign) the respective process will be applied, for which copies of both passports must be provided.

Please note that if the affiliate is up for retirement, or already is outside Peru, the accreditation requirements listed in (a) and (b) will be replaced by a letter emitted by the institution informing that the affiliate is eligible to receive, or currently receiving a pension.

Old Peru hands will tell you that laws here can change quickly, and laws governing pensions are no exception. In fact, pension reform is consistently a hot topic in Congress. So, my best and final advice is that before you leave Peru, make sure there have been no changes in the law.

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