The Governing Board of the National Commission of the Retirement Savings System (Consar) authorized the commissions to nine out of 10 retirement fund managers (afores). However, Afore Coppel’s commission is pending validation by the regulator.
In this sense, eight Afores will charge 0.57% commission and a 0.53% (Afore Pensionissste), with which the average of commissions of the Retirement Savings System (SAR) was reduced from 0.808% to 0.566%, this is a reduction historical record of 23 basis points. Pensionissste, is the only afore that did not make movements in its commission and therefore will charge the same in 2022.
Given this, Enrique Díaz-Infante, director of the financial sector and social security program at Centro de Estudios Espinosa Yglesias (CEEY) said that Iván Pliego Moreno, head of Consar and former president of Pensionissste, would be using said market benchmark afore.
“Market participants are accommodating with authority. So, it is too early to assess whether Consar is correct and coming (Iván Pliego) from Pensionissste can say that it can be reduced to 0.57%; and not go down more than 0.53% because it could already generate losses ”, he commented in an interview.
He added that for now the fund managers are complying with what is imposed by the regulator; However, at one point there will be the possibility that the Afores will argue that they are not covering costs and that there may be mergers between them.
With the decrease in the commission of the SAR participants, workers will benefit from keeping savings in their individual accounts for more than 11.800 million pesos (mp), which will increase the balance for their retirement, the commission said.
“It is good news that nine of the 10 administrators have requested an authorization of a commission equal to 0.57%, as this means a coincidence in the sector for the benefit of workers,” said Rogelio Ramírez de la O, head of the Secretary of Finance and Public Credit who is a member of the Governing Board.
In the statement, Ramírez de la O, added that “this is moving towards the new scheme, where the worker will be the center of attention and competition will be based on the quality of service and the achievement of performance; all this with a reasonable return for the administrators ”.
In this vein, the Center for Economic and Budgetary Research (CIEP) details in a report that the maximum cap on commissions charged by the Afores will impact both positively and negatively on workers.
“(The decrease) will allow the total balance in the workers account to increase in the long term; on the other hand, workers will have to pay a higher amount for commissions due to a higher balance in their account due to the increase in the contribution rate ”, estimated the CIEP.
The Secretary of Labor and Social Welfare, Luisa María Alcalde, told the Board that the decision that was made is “extremely important and it must be recognized that it has been the product of the effort aimed at achieving a better future for the men and women who live off their work, since all the actions have been thought of them ”.
Commission income total 32,900 million pesos
In the period between January and October, the SAR obtained more than 32.9 billion pesos in income via commissions, according to information from Consar. This is an increase of 3.8%, when compared to the same period in 2020.
Likewise, an upward trend is observed in terms of attracting resources that have entered the Afores through commissions since in 2016, these were higher than 27,500 million pesos; while more than 37,800 million pesos entered in 2020.
At the same time, the Consar has reiterated that the expenditure made by the Afores to the commercial area is too much and therefore, with the new cap, a reduction in the amount of resources is sought, for which the Afores must change their business model.
The decentralized body detailed that the total spending of the fund managers is around 18.3 billion pesos, at the end of the tenth month. Of which, 40.4% (7,400 million pesos) are for the commercial area and therefore it is higher than the amount allocated to administration expenses (4,700 million pesos) and others to operating costs (6,200 million pesos).
In 2020, the total spending of the Afores was 21,000 million pesos, of which 42% (8,800 million pesos) were for commercial spending. This almost triples the amount allocated to administration expenses (5,900 million pesos).
According to the CIEP, lower commissions would not impede the operation of the Afores.
Despite the fact that in recent years the expenses and costs of the administrators have increased, they are currently more profitable than in previous years with higher commissions.
“In addition, there is the experience of pension funds in the United States, which deliver high returns with lower commissions than those currently charged in Mexico, with and without reform,” said the research center document.