Operators Call for Comprehensive Pension Reform

The Salvadoran Association of Pension Funds has asked for changes in legislation to be made firm in order to increase the profitability of the savings of workers.

Wednesday, May 2, 2012

The Salvadoran Association of Pension Funds (Asafondos) asked President Mauricio Funes to keep his promise to carry out a second part of reforms to the pension system.

Funes offered to make the changes last month in order to raise the profitability of pension funds in light of strong criticism of the low returns paid on the contributor’s savings, reported Elsalvador.com.

"Enough time for the discussion of the importance of the profitability of the accounts of individual members has passed and as a country, we cannot afford to keep waiting for an opportunity, especially since this has already been announced by the President and the Minister of Finance, in the sense that they should seek better returns through better investment options,", said the president of Asafondos, Ruth Solorzano.

The executive, who is also president of AFP Crecer, cited a draft law on investment funds, and pending amendments to the Securities Market Law as examples of the issues that she is urges need to be completed.

More on this topic

Government "Eats Up" El Salvador's Savings

September 2016

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."

Poor Results of Pension System in El Salvador

July 2014

The impossibility of investing more in corporate securities and less in government debt is inhibiting the long-term growth of savings managed by pension funds.

Studies by experts in the field estimate that between 2006 and 2012 pension funds missed out on between "... $600 and $900 million." Augusto Morales, director of the Salvadoran Association of Pension Fund Administrators (Asafondos, union of the AFP) told that Laprensagrafica.com "... workers' savings total $7.5 billion between the two administrators. Of that total, $2 billion has generated in 16 years (since the system changed)."

Pension Investment Certificates in El Salvador

April 2012

While supportive of the proposed legal reforms to improve the profitability of pensions, the AFP has requested a minimum interest rate of 4% for the CIP.

The two Pension Fund Administrators (AFP in Spanish) are opposed to a limit on interest payments , because it would affect the benefits for contributors at the expense of protecting state spending.

New Proposal for Improving Pension Collections

April 2012

The Salvadoran Association of Pension Fund Administrators has presented proposals to increase collection and maximize pension returns.

Among other proposals, there is a suggestion to rise the interest rate paid by the Government for the certificates that are purchased, in an obligatory fashion, using pension savings, going from an average rate of 1.49% to 4% or more.

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