Peru's Congress looks set to debate a new law next week which is aimed at protecting the country's private pension funds, currently worth about $30 billion.

In the runup to Peru's final round of presidential elections on June 5, one of the two candidates, leftist Ollanta Humala, has outlined plans for a new public-sector pension system to which all workers would make mandatory contributions, leaving private fund contributions elective.

Currently, Peru has workers making mandatory contributions to either a private pension fund or the national public system.

In the last week, representatives from pension funds, which use a percentage of workers' contributions to cover fees and management costs, have said Humala's plan would destroy the private system in its current form.

The new law to protect private pensions is the initiative of current Finance Minister Ismael Benavides and aims to make the private pension funds "untouchable" by any future government.

Humala's rival candidate, the pro-market Congresswoman Keiko Fujimori, is not seen as a threat to the private funds. This is partly because of her pro-market stance and partly because the funds were the brainchild of her father, former president Alberto Fujimori, who is currently serving a 25-year jail sentence for human rights abuses during his term.

Specifically, the new law would see any modifications to the obligatory pension contribution levels being dependent on the approval of Peru's bank regulator, the SBS.

The law would also see the SBS revising and evaluating private pension contribution levels every five years.

The private funds operating in Peru are AFP Horizonte SA (HORIZC1.VL), owned mainly by Holding Continental and Spain's Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC); AFP Integra SA (INTEGRC1.VL), mainly owned by the ING Groep NV (ING, INGA.AE); AFP Profuturo, whose main shareholder is a unit of Bank of Nova Scotia (BNS, BNS.T),and Prima AFP, controlled by Credicorp Ltd. (BAP, BAP.VL)

Some 4.7 million Peruvians are clients of the private pension system, up from 2.7 million in 2001, while pension-fund assets as of February totaled $30.8 billion, up from just $3.6 billion at the end of 2001. Pension-fund assets are equivalent to about 20% of Peru's gross domestic product.

-By Sophie Kevany, Dow Jones Newswires; +51-989 038 043; peru@dowjones.com