A law passed by the Legislative Assembly authorizes the State to use the savings of contributors to pay debts, putting at risk the value of future pensions.
The Salvadoran Association of Pension Funds (Asafondos) is opposed to the measure because it involves "... an endless cycle of debt generation, which would grow unchecked over time, without guarantee of payment for workers."
At the end of April 2016, assets under management grew by 5.8% compared to December 2015, equivalent to an increase of $242 million.
From a report by the Chamber of Funds in Costa Rica:
Managed assets at the end of April 2016, investment funds showed growth in assets under management of 5.8% compared to the volume that was handled in December 2015.In effect, it went from the equivalent of US $4,181,000 (December 2015) to US $4,423 million (April 2016), in other words, and there was an increase of US $242 million.This increase is explained by open-end funds, which made US $193 million, while the closed-end type, made US $49 million.
According to Fitch Ratings, pension insurance has become a problem in terms of technical profitability for the companies that sell them.
From a statement issued by Fitch Ratings:
Fitch Ratings - San Salvador - (April 28, 2016):
Pension insurance has become a challenge in terms of technical profitability for sellers, says Fitch Ratings. One of the benefits of the current pension system is protection against disability and pension insurance, contracted by the Pension Fund Administrators (AFP) for its members. This coverage is provided by insurers and covers the insured against accidents or diseases that would make it impossible for them to work. In addition it also covers beneficiaries when the insured person dies, providing the required additional capital to finance pensions.
The plan developed by Pensions Manager at the Costa Rican Social Security Department (CCSS) also proposes "... devoting a portion of the resources to securities abroad". The objective of the proposal being analyzed by the board of the CCSS is to diversify the investment portfolio for the Disability, Old Age and Death (IVM) scheme, which is concentrated in government debt securities.
Authorization has been given for the investment of surpluses from the Private Contributions Regime to be invested in financial transactions under the supervision of the National Commission of Banks and Insurance.
The agency´s surpluses amount to around $250 million.
Seeking solutions to the threat of insolvency of the pension system, the Costa Rican Social Security Department is analyzing increasing contributions to the fund for disability, old age and death from 8.5% to 14%.
An article on Elfinancierocr.com reports that "...
The new Framework Law on Social Protection allows social security institutions to allocate up to 7% of their assets in physical infrastructure projects and medical equipment.
The law, which will be in effect from September 4, includes among its main innovations the ability for social security institutions to use part of their assets to finance hospital construction projects, both for construction and for the purchase of medical equipment.
The issuance of Pension Investment Certificates at a rate of 3% means a charge to future income of contributors in the Salvadoran AFP.
The refusal by the Ministry of Finance to release the documents that justify the decision to pay a fee of 3% on the savings of the AFP entering the 'Fideicomiso de Obligaciones Previsionales' (FOP), was declared illegal by the Institute for Access to Public Information (IAIP), which stated that financial secrecy does not apply to the FOP and the criteria that supported the decision must be revealed.
Days after securitization was mentioned as an option to finance the expansion of the international airport, the government is now saying that it would be better to use pension funds.
Sending signals which only confuse and generate more uncertainty about such an important work as the extension of the main air terminal in the country, the Salvadoran government now says that using pension funds is the best option for financing the expansion.
Atlantis Group is negotiating with Citigroup to acquire the insurer SISA and the consumer banking portfolio in El Salvador, where it will seek to operate a management and stock brokerage fund.
The group, from Honduras, has operated in El Salvador since it bought Citigroup's 75% stake in the pension fund manager AFP Confia. Now it aims to consolidate its participation in the Salvadoran financial market with a brokerage and investment fund management company.
The subsidiary of Grupo Financiero Ficohsa will focus on supplementary pension schemes administered using the investment fund model.
The pension funds offered by the Ficohsa Financial Group through its subsidiary are mainly aimed at professionals and companies in the private sector.
Eleconomista.net reports that "... Ficohsa Pensiones y Cesantías, is a supplementary pension fund for its members through means of an individual account, which grows with the contributions made plus the return or interest generated by the investments. "
A request has been made that the interest rate paid by the government for using funds from the Pension Trust Bond rise from 1.3% to 7.5%.
Elsalvador.com reports that "... The leaders of the Committee requested yesterday that a new article specifically state that pension funds earn the passive base interest rate used for investments of 180 days and published by the Central Bank plus 3.5% .. . which ... it considers fair in relation to the payment made by the government to other international investors to lend them money. "