LatAm private pension fund regulations watch

Chile’s pensions watchdog SP has published new rules that allow contributors who are in the process of choosing a pension plan to transfer savings to a special temporary current account to protect them from volatility while the process is underway.

The rules, which had been put out to public consultation, become valid on May 1, SP said in a statement, adding that the change could benefit up to 150,000 people a year.

In related news, five opposition senators are preparing a bill that nationalizes the country’s seven AFPs, CNN Chile reported. The lawmakers are aware the bill may be declared inadmissible but want to press on regardless, it added.

A Communist Party lawmaker last week proposed that the assets of the AFPs be declared of national interest, with the aim of starting a process of nationalization, the broadcaster said.

AFP Habitat criticized the moves, branding them populist, local paper Diario Financiero reported. The company also said those behind the proposals were diverting attention away from efforts to address the current crisis, the paper reported.

The government of center-right Sebastián Piñera already has a bill in congress that, if it becomes law, would reform – but not dismantle –  the AFP system.

Chile’s AFP system is highly regarded among investors because of its sustainable nature. Contributions are paid by employees and, in the future, possibly employers, but it has come under fire over the meager pensions it provides for many and the risks that savers must shoulder.

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In Peru, President Martín Vizcarra has until next Wednesday to promulgate a bill that allows workers to withdraw some of their pension savings, local paper La República reported.

The draft legislation – already approved by congress – was created to help support Peru’s 6mn AFP contributors as the country battles the coronavirus pandemic, the paper said.

Assets under management by Peru’s four AFPs stood at around 154bn soles (US$46bn) at the end of March, according to data from watchdog SBS.

Savers would be allowed to withdraw a maximum of 12,900 soles. Those with less than 4,300 soles in their accounts would be able to withdraw 100%. 

In 2016, in a controversial move, Peru’s government authorized AFP savers to withdraw almost all of their pension savings on retirement. Billions of dollars in savings exited the system.

Calls have been made to improve the country’s pension system, which also has a public scheme that workers can opt into.

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Salvadoran lawmakers in an ad hoc committee are studying a request from pension savers to withdraw funds from their AFP accounts to help weather the COVID-19 storm, a statement from the national assembly said.

AFPs said they lacked the liquidity to implement such a measure. Lawmaker Donato Vaquerano said this reflected the “irresponsible” use of savers’ money, adding the companies must seek a solution. 

The committee is due to meet again next week. 

El Salvador’s two AFPs held nearly US$12.2bn in AUM at the end of January, according to the financial services regulator.

The country passed major pension reforms in 2017. Among the changes, legislators introduced a degree of pension freedom.