MEF: commissions are equivalent to 70% of what the AFPs earn

Within the framework of the debate on the reform of the pension system, the head of the Ministry of Economy and Finance (MEF), Alex Contreras, took stock of the AFPs, a model established in our country for 30 years.

Thus, in addition to not establishing a minimum pension for members who make a minimum amount of contributions, the official also admitted that the commissions charged in the private system could have been improved, considering that this concept is the majority of the AFP profits.

“Flow commissions represented 70% of the AFP profits. The commissions could have been reformed a little more of flow,” said Contreras Miranda in dialogue with La República.

In fact, for the payment of commissions carried out by affiliates monthly, the AFPs obtained income of S/855 million 567,000 between January and September of this year.

Likewise, the profits of the four administrators exceeded S/362 million, which represented an increase of 9.7% compared to the S/330 million net profit reported in the same period of 2022, according to official information from the Superintendency. of Banking, Insurance and AFP (S.B.S.).

Arturo García, professor of Finance at Esan, explains that the AFP’s profit is due to the fact that this year the financial markets have recovered, thus achieving a profit from the legal reserve of S/47.9 million, which did not happen in the first years. nine months of 2022.

Low competition

In the opinion of the head of the MEF, these adjustments in the commissions They would not have occurred because there is no greater competition in the private system. Currently, there are only four administrators: Habitat, Integra, Prima and Profuturo, which manage the funds of more than 9 million members.

“There was no entry of new participants, (a) competition that generated an adjustment in the commissions,” the official said.

Noelia Bernal, an economist and researcher at the Research Center of the Universidad del Pacífico (CIUP), agrees with this, and reaffirms that the AFPs are charging a lot to manage the funds and maintains that this is because the industry is oligopolistic, that is, with few companies providing said service. Furthermore, added to this is that the design does not have incentives that would lead the administrators to reduce commissions.

“The industry obeys the design of the automatic collection made by our employers and the money automatically enters the AFP. So, since AFP receives the money directly and does not have to go look for the client, therefore, it has no incentive to lower prices on that side,” argues Bernal.

Faced with this problem, the Executive Branch, in its pension reform proposal, seeks to incorporate new competitors in this market, such as companies in the financial system such as banksmunicipal banks, microfinance institutions, insurance companies, among others.

In the opinion of the CIUP researcher, it is favorable to allow more competitors to enter the pension system. However, she added that the potential for new customers for companies entering the market would be very small due to the small formal labor market that exists, therefore, the fight would be to attract members who already belong to an AFP.

“One can predict that there may be a price reduction, but it would not be possible to know if it was a lot or a little because there is a certain concentration between companies and the financial system,” he concludes.

Fund 3 close to recovering losses

After a 2022 where the profitability of the funds was falling, they have been performing positively so far this year.

Thus, Fund 0 (5.72%), Fund 1 (1.52%) and Fund 2 (0.15%) were already able to recover the losses that occurred. Meanwhile he Background 3 (-0.83%) is close to this objective, reveals Arturo García, ESAN teacher.

For her part, economist Noelia Bernal indicates that, although good long-term profitability is obtained, this is reduced by the high commissions charged monthly to the affiliate.

“Indeed, you background It grows thanks to good profitability, but is reduced due to a high price,” says Bernal.

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Alex Contreras, Minister of Economy

“Flow commissions represented 70% of the AFP profits. The flow commissions could have been reformed a little more. (There was also no entry of new participants).

Noelia Bernal, CIUP researcher

“The price they charge us for this service is extremely expensive because the industry is oligopolistic with few companies providing the service. “There is no competition of 300 actors like in other countries.”