Flexiblity in Pension Fund Investments

Given the low returns from pension funds in El Salvador, there is discussion on removing the requirements for operators in order to invest in more instruments.

Monday, March 12, 2012

The pension fund administrators (AFP in Spanish) and the government are exploring alternatives for increasing the profitability of the pension savings system.

Currently, the AFP is required to ensure that each investment destination has dual risk rating and is registered for that activity in El Salvador. One possible reform would make external certification by an investment fund manager enough requirement to invest.

"We will relax some requirements," said Omar Martinez, Pensions Manager at the Superintendency of the Financial System (SSF), reported Laprensagrafica.com.

Another possible solution would be to authorize the investment of assets abroad, although this would require mechanisms for controlling and determining the percentage of funds that an administrator can use abroad.

Finally, Martinez noted that the return on pensions at the end of 2011 was 2.82%, which is keeping the funds at a very low level compared to historical values.



More on this topic

Less Commission for Pension Funds

March 2012

The government of El Salvador is promoting a reform to lower the percentage of commission given to the AFP from contributions, from 2.7% to 2.2% and that seeks to improve yields for contributors.

The government of El Salvador has listed a series of reforms to the pension law. One is to reduce the commission received by the AFP from 2.7% to 2.2% for each contribution in order to increase the returns to workers.

Salvadoran Pension Fund sold to Colombians

January 2011

99.99% of AFP Crecer was acquired for $103 million by Colombian company Protección S.A.

While the transaction has already been signed by both companies, the approval of financial supervisory authorities still remains.

"Proteccion SA is a pension fund manager which manages pension savings for more than three million workers across Colombia," published Laprensagrafica.com.

How Pension Funds Administrators Manage the Crisis

October 2009

Business Magazine América Economía presented its 2009 ranking for the industry, along with an analysis of its key aspects.

América Economía's 2009 Pension Fund Administrator ranking lists the top 100 Latin American operators. Three are from Central America: Confía and Crecer from El Salvador, 46th and 50th, and Costa Rica's "Popular Pensiones", in the 96th position.

Operators pension resent low yields

March 2008

The low yields hit the income received by the operators of pensions (OPC), and thus their profits.

Revenues from the OPC-together-were reduced by 21% in the past year, going from ¢ 3,580 million in February 2007 to ¢ 2,810 million in the past month.

The Carriers Revenues come from the commission on yields they apply to pensions obligatorias.

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