UPDATE 2-Chilean fund Habitat shakes up Peru pension system

Thu Dec 20, 2012 2:47pm EST

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(Adds quotes from Habitat official)

By Mitra Taj

LIMA Dec 20 (Reuters) - Chilean pension fund Habitat shook up Peru's pension industry on Thursday, saying it would slash fees to a fraction of what competitors charge and winning the right to sign up all new contributors for two years.

Habitat, a unit of Chile's Inversiones La Construccion and one of the top three pension fund managers in Chile, submitted a bid so low that it elicited gasps from members of the audience at the auction run by Peru's banking and insurance regulator.

A newcomer to the Peruvian market, Habitat offered to charge an overall management fee to contributors of 0.548 percent - about 70 percent less than prevailing fees currently charged by the four pension funds that run Peru's $30 billion pension fund industry.

Those funds - known as Horizonte, Prima, Integra and Profuturo - are mainly linked to bank holding companies.

Peruvian President Ollanta Humala said the auction, which guarantees Habitat an estimated 700,000 new clients over the next two years in Peru's fast-growing economy, had ushered in a new era of "healthy competition."

"I suggest the other funds wake up and start lowering commissions," he said.

Another auction will be held two years from now. Under rules the government created earlier this year to drive down high fees that irked customers, pension funds must now periodically compete for new members by participating in auctions to see who can offer the lowest commission.

Daniel Schydlowsky, the president of the banking regulator, said he expected established pension funds to cut fees for about 5 million existing customers or risk seeing them migrate to Habitat.

"With the commission offered, I wouldn't be surprised if more people choose to enroll," he said.

Peru's 20-year-old private pension system, which largely replaced one run by the government, is the most important source of investment capital in the Andean country. The government wants to encourage small firms in the informal sector to push workers onto payrolls and turn them into contributors.

"We expected the competition to be tougher," said Jose Miguel Valdes of Habitat's legal team. (Reporting by Mitra Taj; Editing by Terry Wade and M.D. Golan)

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