The reduction in the commissions paid to the Administradoras de Fondos de Pensiones (AFP) proposed by the Executive Branch in a new bill sent to Congress on Tuesday, 5 March 2019 does not meet the expectations created when the project was mentioned by President Danilo Medina in his 27 February Independence Day state of the nation address. There had been expectations that the amendment to Social Security Law 87-01 would reduce the high earnings reported by the primarily bank-owned pension plan administrators and that this would be redistributed to the individual pension plans. The way the system is, the banks are the big winners and critics say retirees would have been better off doing the savings on their own.
As reported in Diario Libre, pension plan expert Arismendi Díaz says that the AFPs will keep their “juicy profits.” Díaz says there is no incentive for the companies to effectively manage the plans. “Their profits do not depend on their performance, only on the exponential growth of the retirement fund,” he explained.
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Diario Libre
6 March 2019