The investment of pension funds in Pension Fund Administrators (AFP) have had a five times higher performance to which those resources would have had if they had been invested outside of them.
This is stated in a report by Juan Manuel Sontageconomist and consultant, who explains that if one takes, for example, returns over a year in December 2021, anyone who would have invested RD$600,000 outside of their AFP (if they had the choice) for 30 years, would have accumulated in the best of cases, little more than RD$4 million, five times less than the more than RD$21 million that the AFPs would have obtained with the same initial capital.
The report explains that with respect to the current system, that of individual capitalization, it is necessary to recognize that the administrators have done an efficient job in terms of treasury.
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“Our funds show a higher profitability than the regional average and much higher than if we had put these savings on the market through another financial instrument. In fact, the AFPs have allowed a profitability like no other of the money of each one of the affiliates”, he says.
He points out that not even by accessing the same instruments (mainly government bonds traded on the stock market) we would have obtained returns outside the AFPs like those left to us by our pension funds.
“And no, it’s not magic, it’s that while our administrators approach the market to place billions of pesoswe could come close with just thousands or millions”.
However, the report highlights that the benefits of the individual capitalization system go beyond the financial gains generated by the AFPs, since that may be achieved by a very good intermediary.
“In addition, our system also offers important guarantees, such as: very strict controls on where the funds are invested to reduce risks and avoid losses; the nature of the contributions imposes on us the obligation to save, preventing circumstantial situations from dissuading us from saving for tomorrow; employer co-participation is expected, contributing about 70% of everything that goes into our account monthly and, as if that were not enough, our savings in the AFPs are unattachable, so even in our worst circumstancesThey will be there.”
However, the report points out that the current individual capitalization system has many opportunities for improvement and as a society we must empower ourselves, analyze it and work on them together, but not destroying what already exists and then building. We must sustain the victories that we already have, such as the very existence of a system that allows incentives for high returns and with the possibility of sustainability over time, and based on them, promote improvements”.
He suggests ensuring that the system reaches many more (formal and informal) and guarantees quality pensions for all, appealing to more competitive salaries and that workers have the opportunity to contribute permanently and not intermittently as is the case today.
