New pension rules to speed up account transfers

Mexico's pension fund regulator Consar has issued new rules facilitating the transfer of individual retirement accounts between pension fund managers in a move that is likely to spur greater competition in the pension industry. It will now be the responsibility of pension fund database manager Procesar to verify the authenticity of account transfer requests rather than up to the Afores as was previously the case, Consar said in a statement on Wednesday. Workers who want to change pension fund company, or Afore as they are locally known, need only provide their personal ID number or other legal identification and fill out a universal pension account transfer request. Both Afores involved in the process must provide the worker with documentation verifying that the transfer took place. "The winners here are workers. The intention [of the new rules] is to help the account transfer process, which had some shortcomings. One being that it used to be the ceding Afore that verified if transfer request was valid or not which created potential conflicts of interest," Afore Actinver CEO Alvaro Madero told BNamericas. Afore Actinver is Mexico's newest Afore, having opened its doors in April 2003 with affiliation strategy is based on signing up the 35,000 high-income clients of parent company and investment fund manager Actinver. "We think it will benefit us [Actinver] because we are looking to capture people affiliated with other Afores," he added. Consar's efforts to streamline the transfer process and an information campaign aimed at educating workers about the pension system have led to a significant increase in account transfers and a 28% drop in commissions. Until March 2003, only 439,000 workers had switched Afore since the system was adopted in 1997. However, in the 12 months since then over 2 million workers changed Afore. Mexico adopted a private pension system to replace the state-funded system managed by social security agency IMSS. Under the model, salaried workers contribute 6.5% of their gross wage to Afores, which then invest that money through special investment vehicles called Siefores.