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AFPs call for increase in retirement age

SANTO DOMINGO. The legislative proposal put forward by the Dominican Association of Pension Fund Administrators (ADAFP) modifies Article 45 of Law 87-01, which would increase from 60 to 65 the retirement age needed to receive a pension.

However it also establishes, at the same time, that the person should have accumulated a fund that will permit him to enjoy a retirement equal to or higher than the minimum pension.

Another option suggested by the ADAFP to the Senate Commission for Social Security, Labor, and Pensions, is that having reached 60 and accumulated a fund that would allow the person to enjoy a retirement income that was over 50% of the minimum pension.

The association explains that in the case of reaching 65 and not having a fund that would allow the persons to enjoy at least a minimum pension, the person would have the right to request the benefits from the Fund of Social Solidarity, as long as he fulfills the minimum number of payments established by the law.

They specify that an affiliate who is 65 or over, whose fund is not sufficient to finance a pension that is equal to or superior to the minimum and does not fulfill the requirements to opt for the benefits of the Social Solidarity Fund, could request that the total amount in the fund be paid to that person in one lump sum.

The current law establishes 60 years as the retirement age and 360 months of contributions, or being 55 and with a fund that is sufficient to allow the person to enjoy a retirement check equal to 50% of the minimum pension.

The ADAFP justifies the increase in the retirement age of the worker because of the increase of life expectancy in the country and as being consistent with the international tendencies of adjustment of this parameter in the different pension systems.

Pension for dismissal

The proposal by the Pension Fund Administrators would provide that the affiliate will have the right to a minimum pension in case the person is dismissed due to old age when he is removed from a paying job, has reached 62 and has accumulated a fund that would permit the person to enjoy a pension equal to or superior to the minimum pension.

The AFP commissions

The ADAFP suggest modification to Article 86 of Las 87-01 whereby the AFPs can only collect or receive income from their affiliates and from the employees under two concepts: a monthly administrative commission whose amount cannot be greater than 0.33% of the monthly salary of the affiliate and that will be gradually reduced until it reached zero, so that the difference as a result of the gradual reduction will be accredited to the retirement account of the worker in order to increase his pension.

Within a span of three years, starting in January 2014, the monthly administrative commission will be 0.33%; from the first of January 2015 until December 2015 it will be 0.17% and from January 2016 it will be zero percent.

Another option is a yearly commission applied to the total assets of the administrative fund of as much as 2.5% which would be reduced gradually until it reaches 1.5%. The Superintendent of Pensions would establish the procedure for the daily calculation of this commission and collected monthly.

The legislative proposal includes a transitional paragraph, in which it says that the commission will be gradually reduced every 36 months, until it reaches a maximum level of 1.5% of the total assets of the administrative fund, according to the following scale: January 2014-December 2016, 2.5%; January 2017-December 2019, 2.25%; January 2020-December 2022, 2.0%; January 2013-December 2015, 1,75% and in January 2025, 1.5%.

There would be charges for optional services, expressly requested and interests charged to the employer for delays in the payment of the administrative commission.

Other aspects

The proposal by the ASAFP suggests also a change in the scheme of the charges for the commission of the AFPs for establishing a commission on the total assets that are administered, with a gradual reduction in function of the growth of the funds. “With the mechanism the determinations of the charges on the part of the AFPs is simplified, and above all, it facilitates the understanding by the affiliates,” says the proposal.

They also suggest a gradual increase in the percentage of the contribution that goes into the account of the affiliate so that the person can accumulate more in his AFP account for his retirement, without this change meaning an increase in the payments by the workers or their employers.

In addition, they want to adjust the measurement periods of the system according to the long term characteristics of the system, referencing it to three years and assimilating the limits applicable by the Monetary and Financial Code to the investment operations with regard to the parties involved.

Until November 2013 the AFPs signed up 2,866,790 million affiliates, which with the individual capitalization accounts are the owners of total assets in the pension funds of over RD$190 billion.

Restricted areas for investment

According to the document, the AFPs cannons invest in securities that require guarantees or tariffs. The funds cannot be invested in shares of the AFPs, or insurance companies, or in risk-assessment companies.

They could be invested in companies in which the owner, shareholders, directors, administrators and executives of the AFPs have majority participation. In all cases, this investment can never exceed the limits to that end is ordered by the Monetary and Financial Code in effect for the investments of the multi-bank entities in entities of related support and services.

Source: DiarioLibre

Category: DR News |

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Last updated March 25, 2017 at 5:40 PM
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