The Superintendency of Pensions (Sipen) maintains its position that the reduction in the balance of the individual capitalization accounts of the pension funds is due to a temporary situation in the financial market and not irregular. However, the National Observatory for Consumer Protection (Onpeco) is studying the possibility of a collective lawsuit in defense of the affiliates of a system that concentrates 4 million people.
Members of the pension system received recent reports with varied reductions in their total balance for the month, for example, of RD$6,814.09, RD$50,000 or more. Sipen reports that, as of February 28, the percentage of the total amount of commissions charged by the Administrators of pension funds (AFP) with respect to managed equity was 0.08%, also showing a reduction of -9.05% in relation to what was collected in the previous month.
He assures that the situation is temporary and that the contributions made, both by workers and by employers, have not been reduced. “We can see that in the first nine days of March the performance has begun to level off, presenting a 0.24% increase in relation to the month of February,” Sipen responds in writing to Free Journal to a questionnaire -which contains questions posed by the economist Arismendi Díaz in an interview with this newspaper- which is reproduced below.
-There are people who still do not understand how their pension fund -which they consider savings– it can decrease without having consumed it, as has happened recently, since they understand that the monthly balances should not go down, but rather increase or be maintained. Can you explain better if this is possible in the pension system?
The contributions made by both workers and employers have not been reduced, what the fund has experienced has been a reduction in the returns it had previously earned. This can be validated in the account statements, which present the amounts contributed and the final value of the fund. Pension funds are expressed in installments; that is, each affiliate has a number of fees with a monetary value, called the value of the fee.
This quota value is variable and depends on market conditions, it is calculated daily and depends on the daily return on resource investments, which may be lower or higher. In this sense, when verifying the balances between one month and another, the affiliates can realize that there is a possibility that, in a particular month, the performance is much higher than the previous month or vice versa.
Currently and due to external factors that have arisen in the financial market such as the appreciation of the currency against the dollar, increase in the monetary policy rate, among others, the return on investments has been impacted and, in this case, in particularly in negative amounts.
It should be noted that the total contributions made to the pension funds as of February 28, 2022 amounts to the sum of RD$448,930,155,792.80 and the equity as of the same date is RD$805,983,185,458.56, which represents a higher value of RD$357,053,029,665.76, this being value around 44% of the total fund. What there has been is a reduction in the profits obtained by the pension funds as of February 28, 2022, in relation to the profits registered as of January 31 of the same year.
—What is the total amount and the percentage of losses in the value of the financial instruments of the accumulated pension fund?
As of January 31, 2022, the equity of the pension funds was RD$809,858.9 million, while as of February 28, 2022 the amount corresponding to the equity of the pension funds amounts to RD$805,983.2 million, representing, on average, a reduction of -0.48% with respect to the equity of January 31. Likewise, the reduction in the share value of the pension funds on average was -0.40%. However, in the first nine days of March, the assets of the funds represent 0.70% more than that corresponding to February and 0.22% more than that corresponding to January 31, 2022. Likewise, the share value has grown in 0.24% in relation to the value of February 28, 2022.
(The equity amounts do not include the Romana complementary fund, the Inabima or the Social Solidarity Fund).
—What have been the financial instruments of the most affected pension funds and in what proportion?
About 24% of pension funds are invested in dollars, which must be converted daily to pesos. Due to the recent appreciation of the peso, the value of these instruments is lower.
—How much was the total amount and the percentage of profit obtained during the period by the affiliated Dominican workers?
The weighted average return for the month of February compared to the month of January is -0.84%. However, the weighted average nominal return of the pension funds for the last twelve months was 9.11%, which includes the negative effect of the month of February.
—What was the total amount of the commission discounted and charged by the AFPs to affiliates during the reference period?
The percentage of the total amount of commissions charged by the AFPs with respect to the equity of the pension funds as of January 31, 2022 was 0.09%, while, as of February 28, the percentage of the total amount of commissions charged by the AFP with respect to managed equity was 0.08%, showing a reduction of -9.05% in relation to what was collected in the previous month.
—What are the options available to alleviate this crisis, in the event that this situation continues?
The current situation is conjunctural and typical of the financial markets, where there are external factors that affect the behavior of the markets. Prices will normalize and fund yields will return to normal, reaching previous levels and increasing. In fact, as of March 9 of this year, the value of the assets of the pension funds exceeds the value reached on January 31, 2022.
—When is it expected that the negative balance that harms the country’s future pensioners and retirees can be reversed?
The situation is temporary and we can see that in the first nine days of March the performance has begun to level off, presenting a 0.24% increase in relation to the month of February.
“Onpeco is studying the possibility of a collective lawsuit in defense of the millions of affiliates who have been affected by not complying with the mandate of this Social Security Law, on minimum profitability”
The National Observatory for Consumer Protection considers that the AFPs must “replace the funds deducted from the member’s personal account balance, as it is an illegal action not provided for in Law number 87-01.” He considers that this surprised the affiliates “without prior notice”, which he assures constitutes “another violation of the rights of consumers and users of goods or services.”
When referring to the violation of Law number 87-01 that creates the Dominican Social Security System, Onpeco invokes article 103 of the same law, which says: “All affiliates to the pension system will enjoy a guarantee of real minimum profitability of your individual account.
As for the justifications that Sipen has given, the observatory questions that “it has ignored” article 104 of Law 87-01, which establishes that all AFPs must maintain an account called “Profitability Guarantee” on a mandatory basis.
“The argument put forward about investing in dollars falls flat, because the benefits of profitability should be in that currency, in any case, so that, wherever you look at the action of the AFPs that subtracts from the funds of their affiliates, there is opacity in the information, but, above all, because the possibility of reduction does not appear anywhere in Law number 87-01; therefore, we reiterate that the decision that affects millions of savers in the AFPs is illegal” , indicates in a press release the entity chaired by Altagracia Paulino, former director of the National Institute for the Protection of Consumer Rights (ProConsumidor).
“In that sense -he adds-, Onpeco is studying the possibility of a collective lawsuit in defense of the millions of affiliates who have been affected by not complying with the mandate of this Social Security Law, on minimum profitability.”
