The Pension Fun Administrators earned 3.5 times more than the people they say they protect
SANTO DOMINGO. The Pension Fund Administrators (AFPs) earned 3.5 times more than the persons that they say they protect. During 2014 the AFPs accumulated after-tax earnings of RD $3.325 billion in net earnings.
On the one hand, this result is 21.9% less than the benefits obtained in 2013, when they accumulated RD $4.255 billion in net earnings.
Nevertheless, on the other hand, even with this reduction, the net earnings of the AFPs in 2014 amount to 41.7% of the total assets with which they closed 2013. In comparison on average, the pensioners which the system says they protect only received average earnings of 12%.
In 2013, the AFPs did much better, earning 4.8 times more than the pensioners. At that time, they achieved a return on equity of 64%, in comparison with that received on average by the pension funds, which is 13.23%.
The high earnings of the AFPs in 2013 coincided with the increase in the prices of the bonds from Hacienda and the Central Bank which circulated on the stock market, which is where they have placed the greatest part of the funds. This permitted a strong evaluation of their investment portfolios, to which they applied the complementary commission of 30%.
The AFPs collect this commission on the profit margin obtained by the pension funds that is above the interest rates of the certificates of deposit of the banks. The high earnings by the AFPs made the Superintendency of Pensions (SIPEN) take the step of imposing a cutback of five percentage points on that commission, lowering it to 25%. At least, as of March 2015, the AFPs have been applying that 25%.
At the present time, Congress is discussing a legislative proposal which would reduce this commission to 15%.
Besides the complementary commission of 25% collected by the AFPs, they also receive 0.5% as a basic commission for the administration of the funds. This percentage is discounted from the monthly contributions made by workers and companies to the pension funds.
The large earnings accumulated by the AFP’s strongly contrast with the reality faced by the male and female workers when they discover the financial conditions of their retirements. The SIPEN reveals this on its webpage, where it has placed a calculator which permits the public to project the financial future that the pension system will provide.
As of today, a young woman, who at 18 years of age and enters the labor market for the first time, with a starting salary of RD$15,000, will receive when she reaches 60 years of age a pension of RD$12,463.98, equivalent to 59.86% of her salary.
But in order to achieve this pension, during these 42 years she should comply with some conditions. First, she should maintain herself employed uninterruptedly during all this time. She should receive a yearly increase in her real salary of 1%, in a country in which the real salaries have fallen by 20% between 2000 and 2010, according to information from the International Labor Organization.
In addition, the AFP to which she is affiliated should provide nominal earnings of 12.35%, equivalent to real earnings in yearly terms of 5%.
And this uncertain pension appears to be her best possible world, under these conditions which are difficult to maintain in the Dominican Republic.
Under the same conditions, a young man who starts work at 18 will receive a pension of RD$14,061.99, equivalent to 67.54% of his last salary, which also puts into evidence as if it were in not enough, a problem of gender inequality in Social Security.
April 13, 2015
Category: DR News |