“In terms of income, it is the worst year for the Afores, but not for the workers”

It is not a bad deal, going forward it will be profitable. What the government did was try to lower costs and what it did do is that it made the system one of the cheapest in the world for workers and this is good news.”

2022 has become the worst year for the business of Retirement Fund Administrators (Afores), but not for workers, despite the disabilities, assured the president of the Mexican Association of Retirement Fund Administrators ( Amafore), Bernardo Gonzalez Rosas.

In an interview with El Economista, he explained that this period of disability is not the deepest that has been seen since the Retirement Savings System (SAR) came into existence, but it has been long, “in fact it is the longest for the Siefores Price Index, since it takes 244 days”.

So far this year, the Siefores Price Index has fallen 6.5% from the maximum reached on December 30, 2021, which compares with the 20% drop recorded in the financial crisis of 2008-2009 and with 22% who suffered in 2014.

At this time, in what González Rosas called the “inflationary crisis”, the siefores index has a loss of 6.5%, but when compared with the IPC of the Mexican Stock Market (-16% in the same period) or with other indices the falls have been deeper, he said.

minutiae

Regarding the assets managed by the Afores at the end of 2021, the losses accumulated between January and September of this year represent 9%, and stand at 473.8 billion pesos at the end of September, according to Consar figures.

Bernardo Rosas emphasized that during 2022 there have been six months with disabilities and three with capital gains.

He pointed out that when the siefores index is at its lowest point, it generally recovers and grows much more. At this point, he recalled that in 2014, when the central banks normalized their monetary policies, the index fell 10% in 47 days and took 324 days to recover.

“Then came the greatest period of progress in the history of the system, with 70 months of 40% growth until Covid-19 hit us, when a 9% drop was recorded, for 30 days, and in 60 days already We were growing,” he said.

For this reason, he insisted that the investment strategy of the Afores is long-term and “what can be seen in the history of the siefores index is clearly a growing trend that multiplies savings.”

What happens if I am about to retire?

Asked about the situation faced by the pensions of people who are about to retire, he recalled that in the case of the siefores that are about to close, the resources are invested in very liquid things, “they are not in shares, CKD’s or fibers, which are the instruments that are having the greatest impact on value due to volatility”.

These resources are invested in government bonds, and for this reason he insisted that people who are about to retire must be told: “you are not having the same impact as someone who is starting to work and who does have a combination of greater risk (in your investment), you are already in very low-risk instruments”.

The risk is limited, and we must remember that someone who is about to retire is going to have a life annuity, and if the government bond falls in price, then a cheaper pension can be purchased.

double negative effect

Is it still a profitable business for the Afores?, the director of the body that brings together the Afores was questioned.

“Not really this year, because since they put the cap on commissions, you can see what Consar has been reporting on the losses of the Afores. The drop –of 74.6% in the income of the Afores at the end of September– has two effects on the income of the Afores. In terms of income, it is the worst year for the Afores, but not for the workers”, he answered.

He added that “in the business there was an impact because the maximum limit was placed on commissions – they went from 0.81 to 0.57% – and on the other hand the balance fell, and when the savings balance falls, income also falls. When there are capital losses, the balance is reduced on the basis of which you charge the commission. Income is price by quantity and in this case the price was reduced, because the commission was lowered and the quantities were also lowered, due to the balance, so there is a double negative effect”.

Bernardo González, is former president of the National Banking and Securities Commission, and today as a representative of the industry, he assured that “it is not a bad business and it will be profitable in the future. What the government did was try to lower costs and what it did do is that it made the system one of the cheapest in the world for workers and this is good news”, he concluded.

Part of the reform

In 2023, employers will contribute more

Next year, employer contributions to retirement fund administrators (Afores) will increase for the first time, and until 2030, as part of the reform to the Social Security Law (LSS) carried out in 2020. However, the The increase will not apply to people who earn a minimum wage.

The contributions made by employers to fund administrators will rise gradually from 6.5 to 15% of salary until 2030, and by 2023 it will remain at 7%, with which the Afores will capture 500,000 million pesos per year, according to with the National Commission of the Retirement Savings System.

The reform of the LSS establishes that each year the goal to be entitled to a pension via Afores will be increased by 25 weeks. Thus, by 2023, 800 weeks of contributions will be necessary to start the retirement process.

pension adviser

In addition to the changes of the 2020 reform, in the following year the figure of pension advisors will come into force, which will professionalize the promoters –and service agents– that currently operate in the Retirement Savings System (SAR).

Last Saturday, October 22, the penultimate test was carried out. On December 3 will be the final exam to find out who can serve as a pension advisor.

In the absence of data from this weekend, in the first evaluation 12,000 promoters and service agents took the exam, of which 6,000 have accredited the certification.

The main change between the promoter agent and the pension advisor is in the collection of their remuneration.

In other words, its incentive will no longer be the commission charge for the transfer of accounts, but rather to encourage voluntary savings and generate accounts in the SAR. (With information from Santiago Nolasco)

ana.rosas@eleconomista.mx