Peru's Congressional Economy Commission has approved a law aimed at protecting the country's multibillion-dollar private pension funds from populist proposals ahead of final round presidential election.

A full session of Congress is now required to ratify the bill, which aims to make the funds "untouchable" and would see any proposed changes to the private system needing Peru bank regulator approval.

A congressional spokeswoman said the full Congress vote could take place this week or next week.

Peru's private pension funds, which manage assets worth almost $31 billion, have become an election issue in the run up to the final round vote on June 5 between pro-market Keiko Fujimori and leftist Ollanta Humala.

Humala's official governing plan proposes a new public-sector pension system, to which all workers would make mandatory contributions. According to the manifesto, pensions would be available to everyone over 65 and would be financed by taxes and worker contributions. Currently workers must make mandatory pension contributions, but they can choose between private funds and a public one. Many workers are "informal" and have no pension plans at all.

Pension fund managers say making public contributions mandatory would destroy the private model, which covers fees and operating costs using a percentage of worker contributions.

Keiko Fujimori has said she won't touch the private pension funds, which were the brainchild of her father and former president, Alberto Fujimori. A statement on the webpage of Fuerza 2011, Keiko Fujimori's party, however, says it would seek to "significantly lower" private fund commissions. Current average commissions are about 2% of a workers salary, while worker's contributions are 10% of their wage.

Another proposed law, to be voted on by the Congressional Economy Commission before the end of May, aims to reduce private pension fund commissions. Both proposals are the initiative of current Finance Minister, Ismael Benavides.

Almost 5 million Peruvians have private pension funds. The fund system, based on a model developed in Chile in the 1980s, began operations in 1993, when the public pension system was almost bankrupt.

Pension 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)

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