It’s the second time pension returns have fallen: Leader

The head of the trade union explains the government’s impact on shareholders who see money loss in AFP’s account statements.

Does the government bear any responsibility for the fact that workers have experienced a loss in the profitability of their pension savings?

Patricio Pineda, the leader of the Roundtable for a Decent Pension, whose organization represents thousands of employees who advocate for a better pension, replied that there is influence from the government and explains why he thinks it has become a crisis.

“In terms of profitability, this is the second time that we Salvadorans have been hit in the back,” the leader said.

According to the founder of the union, who for years closely followed the state of pensions in the country, the same official data from the Financial System Supervisory Authority (SSF) in its report from May 2022 reflects how the money is invested. of workers managed by AFP and the reason for the low income cited by many Salvadorans on social networks.

Workers’ pension savings continue to cash in despite profitability dip in May

“What we workers saved from 1998 to May 2022 is just over $13 billion, but the important part is that the investment portfolio of this fund (with fixed and variable income) is between the conservative fund and the private pension fund. Pensions will be paid to retirees), but there is About $ 800 million (invested); the sad thing is: of the $13,000 million, there are nearly $7,500 million, according to the report of the watchdog, which is invested in state securities through the Social Security Obligations Fund (FOP), Pineda explained during Interview on channel 21.

what does that mean? The leader summed it up as follows: “The Salvadoran state, having taken advantage of that money, has paid us ridiculous rates; they come to the official labor offices annually through the agent, one is INPEP and the other is Social Security, and they say: I need many millions to pay (pensions). retirement), and the AFP gives them to them because the law says so, that’s all a legal lock out there.”

For Pineda, “The problem is that what the government pays at interest is low and today is added to external factors beyond our hands, such as the Russian invasion of Ukraine causing inflation rates around the world, and the country is financially overwhelmed.”

To put it in perspective, while the government pays Salvadoran workers a rate of around 4% for the money they lend to pay their pensions, it pays foreign investors rates of up to 10% for Eurobonds.

Pension savings will be taken away by government due to lack of funds, international agencies warn

According to a statement from the Salvadoran Association of Pension Fund Managers (Asafondos), the nominal return in May was 3.89% in the conservative fund (the savings of young shareholders) and 4.07% in the private pension fund (close to retirement).

This ratio was higher in 2021 when the nominal return was 5.61% in the conservative fund and 4.08% in the private pension fund.

Asafunds noted that workers’ savings are a long-term investment, and therefore their long-term earnings must also be taken into account.

According to May data from the Social Security Fund, workers have $12,640.4 million in savings, consisting of $11,879.6 million from the Conservative Fund and $760.8 million from the Private Pension Fund.

Annabelle Belloso: Pension proposal should not be built ‘behind closed doors’ as Bukele does

inflation blow

Asafunds, which represents the country’s two major AFPs, also attributed the decline in pension profitability to the impact of inflation, which rose to nearly 7.8% last June.

“So its impact on long-term profitability … is limited in any case and does not mean that savings have stopped increasing,” the association said.

Pineda noted that the country’s credit risk levels also had an impact. In fact, financial analysis agency JPMorgan recently published a list in which El Salvador leads the countries, worldwide, with the highest risk of default.

Similarly, in the credit risk index, known as EMBI (Emerging Market Bond Index), the country reached 35 points for the first time in its history and was only surpassed by Venezuela.

“This is thanks to the fact that the country is politically unstable, and unfortunately that is the reality,” Pineda said.

In Pineda’s view, this context also indicates a difference with the previous occasion in which the profitability of shareholder accounts resulted in a significant loss.

“The difference is that in the context of 2005 and 2008, the year of the global economic crisis, what happened was a resounding drop in the LIBOR rate, where rates of return were weighted in favor of the individual accounts of each factor. At that time, there are studies by Fusades and Funde, which say that Between 1998, 2003 and 2004, they earned 12% a year and suddenly it went down to 0.75%, but we never had a crisis where we were even below zero,” Pineda said.

Users line up outside the AFP Crecer branch, located on Los Héroes Boulevard in the capital, to perform various actions, including requesting an advance on their savings. Photo HRE / Francisco Rubio

back to home

Leave a Comment