Could high commissions return to workers’ retirement savings?

The provisional protection that a court granted a few days ago to Afore Azteca Against the cap on commissions brings back to the public agenda the dispute: “The rights of workers against company profits”, as expressed by María Ascensión Morales, a specialist in labor law and social security. But the outcome of this legal action against the reduction of the commissions that the administrators charge to manage the savings of the working population could mean “the collapse of the reform” that ran into those charges, considers Saúl Escobar Toledo, of the Citizen Observatory of the Labor Reform (OCRL).

In December 2020, Congress approved the pension reform promoted by President Andrés Manuel López Obrador to modify the Social Security Law and the Retirement Savings Systems Law. With this, the weeks of contributions to obtain a severance pension in old age and old age were reduced from 1,250 to 1,000. Also, starting in 2023, companies will increase their contribution to the individual account of male and female workers from 6.5 to 15%, this will be done gradually.

In addition, it was agreed to put a cap on commissions that the afores charge. According to the Organization for Economic Cooperation and Development (OECD), the rates obtained in Mexico were among the highest: 0.98 percent. In the United States, they are 0.45%; in Sweden, 0.50%, and in Colombia, 0.62 percent.

In recent days, the First District Court in Administrative Matters, Specialized in Economic Competition, Broadcasting and Telecommunications granted the provisional suspension to Afore Azteca against the limit of 0.57% of commissions included in the reform. This means that, as long as it is not analyzed in depth and it is resolved if this measure is harmful or not, it is suspended only for that company. That is, you can continue to charge a higher commission.

But Saul Escobar, a research professor at the National Institute of Anthropology and History (INAH), specialized in labor issues, observes a “dangerous precedent.” Although the Mexican Association of Afores (Amafore) has reported that Azteca is the only company that has filed this legal recourse, not only could other Afores be added, but work centers that do not want to increase the employer quota could also file their amparos, he warns. “The Ministry of Finance and Public Credit (SHCP) and Congress must intervene to convince the Judiciary to reject the definitive protection,” he adds.

Is a mixed system better?

From the discussion of the reform of the pension system the complaint of the Afores was that their earnings would drop and even that they would go bankrupt, recalls María Ascensión Morales, a research professor at the UNAM Law School. This week marks a year since its promulgation in the Official Gazette of the Federation (DOF) and on January 1, its entry into force.

A high percentage of commissions “reduces the worker savings in their individual account and can lower the replacement rate, that is, the amount of money they will receive when they retire ”, explains Saúl Escobar. If Azteca’s lawsuit is successful, “the retirements of the people who earn the least will suffer the most from the cost of returning to such high rates,” he says.

“It is serious, from the political point of view, that the companies renounce the agreement” that they reached with the Executive so that the reform passed in the Legislative, he says. “When they saw a legal loopholeThey did not hesitate to take advantage of it ”.

And from the social point of view, “the reform was not really beneficial for the workers”, considers María Ascensión Morales. Since 2015, the OECD pointed out that the commissions that Afores charge in Mexico are not only among the highest, but that they did not generate competition. Last week, in a new report, he highlighted the feats of the 2020 reform, ensuring that it has been the most comprehensive of the countries that make up that organization.

“That was said since 1995, when this system was approved, it was warned that this was not going to be the solution to the problem of pensions and that the only ones affected would be the workers. And reality has shown it ”, emphasizes the academic.

This “is a fight that companies do not want to lose. For 24 years they had everything in their favor. Their utilities They were never harmed, neither in the economic crisis of 2009 nor in the current one, although they said that they would fall between 27 and 30%, but that is basically what they took away from workers’ resources. They were not properly and legitimately said earnings ”.

Before the pandemic, the average withdrawals to individual accounts unemployment rate was more than 2.5 million, he argues. This brings a triple penalty to working people, he explains. First, they reduce the amount of your savings; second, they will have to work more years to make up for the weeks they were behind and level the amount they took. Third, he explains, “they affect the general amount of the other insured.”

The International Labor Organization (ILO) has indicated that “it is not convenient to continue with this type of system. That it is better to change to a mixed one, which does not exclude the participation of private administrators, but which is not the only pillar in which the worker risks his present and his future ”. But the discussion in Mexico has not been able to get there, the commissions were barely lowered and now it could be reversed, he regrets.

Saúl Escobar adds that male and female workers receive very little information from the afores on how your savings behave. And in general, there is a wide ignorance of their rights and the reforms in their favor, “surely few know that from 2023 the employer contributions will have to be greater.” The unions and the authorities themselves must do a greater job of dissemination, he concludes.

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