By 2050, the Life expectancy It will no longer be 75 years old, it will be 100 years old in a physical condition to continue doing things, working, being active, as Peter Diamandis, founder and president of the X Prize Foundation and CEO of Singularity University.
With regard to the increase in life expectancy and longevity thanks to scientific and medical developments, the trend is of fundamental importance for pensions and retirement savings funds.
Diamandis said that it is important to take into account the new life expectancy since with scientific advances, it will even be possible to rejuvenate the body, it is necessary to start building the future through savings.
“We live longer, we need more savings for a decent retirement.”
The challenges
Faced with a future with higher life expectancies, all private pension funds face the challenge of generating sufficient returns or yields so that pensions are worthy, as Bernardo González Rosas, president of the Mexican Association of Afores (Amafore) mentioned in interview with The Economist.
He explained that the theory behind which these private pension funds, “It is not just a theory that has been proven over time that returns in stock markets are always positive. Obviously, you can have short-term fluctuations or even fluctuations as deep as the Great Depression, the 2008 Recession or the Covid-19 Crisis, however, they are temporary fluctuations because in the long term profits have been proven.”
“The challenge is that all these funds manage to invest in the right combination of public debt, private debt, shares, that they have a good diversification of the instruments and that the combination of these instruments give returns above other savings alternatives and that It can only be achieved when you have investment teams and people in the Investment Committees with enough experience and knowledge to know where you are investing, to monitor the investments”, he insisted.
He mentioned that in situations like the one we are currently experiencing, where inflation levels are very high worldwide, geopolitical risks and internal and external factors in Mexicorepresents a challenge to generate yields higher than those we are going to see in the reference rates of the central banks.
“Investment fund portfolios should not react to the situation but should really verify long-term returns, that the companies they have selected are issuers that last, and for this a lot of talent is required, this from the internal operation ”.
Investment Approach
The president of the Amafore said that another challenge is that the resources invested by the private pension funds that are allocated today to certain projects and companies are also directed to activities that do not end life in the world, that are invested in a sustainable way. and also that they do not promote injustices that have been perpetuated over time such as fhigh equity in companiesthe lack of inclusion from different points of view.
“It is a human right that there is equity and inclusion among the different groups, it is a matter of performance, also, there are any number of studies where companies that have diversity of gender, of opinions, of visions, of contexts of origin of the employees they are much more productive, they generate higher returns because there are different perspectives to analyze problems and propose solutions and it is also an adherence to good practices, these companies that are very good at adapting to these new skills, new technology and new paradigms , everything makes sense to generate higher yields”, González mentioned.
He said that it is a titanic effort, but in Mexico the institutional capacities of the investment teams and the members of the Councils have been developed to achieve it.
Even the OECD designated in 2020 as the Afores that paid more yields all over the world. “In all countries there was volatility, but Mexico was placed first.”
He mentioned that unlike the previous system of Defined Benefit, what populist politicians say is that the government manage that money again, the government has shown that it does not have those capacities.
“To be able to invest the resources of the workers in the long term, to do it in a sustainable way and also to face this challenge because in the end they have the public budget to make the payments and they are not so concerned that the returns are attractive, because they do not there is accountability regarding returns, this was the case with the IMSS and this was the case throughout the world”.
Technology
González said that it is necessary to adopt new technologies. “The Fintech industry has done it, generating a good experience for customers to use financial services. It is essential that the Afores adapt to provide the best quality of service without friction, without inconvenience, without frustration to customers”.
He considered that whoever does not adapt to the user needsthey are going to lose a space in the market, “today there is competition not only in terms of who pays you more performance but also who gives you the best experiences, with less friction.
“In Mexico, without a doubt, we have to improve customer service, make the services offered to Mexican workers even more digital, make it much easier for those who do not have a formal job to save and make it easier for them, they can do it now. , but the truth is that as an industry we need to work much harder to make it easier for workers to contribute money, whether they are formal or informal”, concluded the president of Amafore.