the AFPs or in the payment of contributions. Some of the evasion is simply due to the fact that workers leave the labor market to pursue further studies, stay at home or start up their own business in which case they are no longer obliged to contribute. Independent workers often stop contributing due to the instability of their incomes, other priorities in the allocation of their savings, or misunderstanding of the benefits and mechanics of the system. However, as highlighted by Vittas (1997b), what matters from the point of view of adequate income in retirement is the extent to which household heads or breadwinners have a full contribution period. As in the other Latin American countries, this is an issue that merits further study.

The SAFP conducted a study (Aporte 7/ 1996) of the contribution pattern which showed the following results: (i) irregular contributions were much more frequent among independent, voluntarily affiliated workers than among dependent workers; (ii) there was no difference in the contribution patterns of male and female affiliates; (iii) the older the affiliates were, the higher the density of their contributions; (iv) there were regional differences in contribution patterns with rural areas showing a lower density of contributions; (v) there was a positive correlation between income and contributions; and (vi) affiliates who were entitled to recognition bonds contributed more regularly. These results, however, were based only on a small representative sample of affiliates which had been in the system from the start and therefore should be interpreted cautiously.

Since the start of the new system, there have been two official programs to retire the employers' debt to the system. These programs enable AFPs to negotiate directly with the employers a scheduled repayment of the overdue pension contributions. The program applies a market interest rate of about 18 percent instead of the much higher rates normally charged on outstanding contributions.

# **_Management Companies_**

The rules and regulations to which the pension fund management companies are subject in Peru are very similar to those applied in Chile. Like in Chile, the Peruvian companies are called _Administradoras de Fondos de Pensiones (AFPs)._ These companies are not allowed to do any other business than pension fund management. They have to be set up as joint-stock companies. Banks, insurance companies, and other financial institutions that already operate in Peru as well as the public social security institution IPSS are prohibited from owning AFPs. The holding companies of such banks and other financial institutions, however, may invest in AFPs.

The AFPs are licensed, regulated and supervised by a specialized agency, the _Superintendencia de AFPs_ or SAFP. The SAFP is an autonomous agency, its staff is subject to employment terms of the private sector including the payscale, and the superintendent is nominated by the President for a term of 5 years. The agency is financed through a fee levied on the AFPs in relation to the size of the funds they administer. This fee started out at 0.2 percent of assets and was subsequently reduced to 0.05 percent in 1996 and 0.00048 percent at the beginning of 1997. The annual expenditure of the supervisory agency has amounted to about US$ 4-5 million; in 1994, annual assessments on the AFPs covered approximately half of the costs while in 1995 they were sufficient to finance practically all the supervision expenditure.

Each AFP is allowed to manage only one fund for all affiliates. The retirement capital managed by an AFP is an independent entity, which is legally and financially separated from the 11