Define parameters for calculation of annuity

Two circulars published by the Central Bank (BCU) - regulator of the insurance market - establish the new parameters that will govern from 2018 for the calculation of the annuities that insurers pay based on the money saved in the AFAP by the workers.

At the beginning of the year and in an attempt to modify some variables of the individual pension savings system, the BCU had consulted the various changes in the current regulations. Yesterday the regulator officialized the new parameters, which have as novelty the passage to unisex mortality tables that will be updated annually and the incursion of a yield curve with the debt securities indexed to wages within the initial income calculation formula.

According to Circular No. 2,287, the monthly payment to be received at the time of retirement, the workers affiliated to an AFAP will be determined on the basis of the accumulated amount "previously decreased in the corresponding taxes"; the life expectancy of the insured and the potential heir of the rent, according to the unisex mortality tables; the probability of leaving beneficiaries; "the average age of the beneficiary that will coincide with the age of the retiree at the time of retirement"; and the interest rate that emerges from the yield curve of salary indexed securities - the new Pension Unit, which the Executive Branch requested to be created by Parliament at the end of August - deducting the margin of insurers.

With respect to the latter, another circular from the BCU states that the administration margin to be charged by insurance companies may not exceed 0.75% of the yield curve result.

It is that part of these changes were driven by the fact that the Bank of Insurance (BSE) loses money with the payment of annuities and is the only actor in that market, since private insurers retired years ago. Part of the problem is that BSE pays pensions that are adjusted by the Average Wage Index (IMS) and the market does not at the moment offer financial instruments to ensure that performance, for which the new Pension Unit was created.

This situation had not had an impact in the BSE finances in the previous years, but with the 20 years of the mixed passivity regime (with the participation of the AFAPs), more and more annuities are being paid. BSE Vice President Guillermo Porras said in March to El País that the changes to analysis will "improve" the numbers of the annuities business and will help "the sustainability" of the system.

After knowing the draft that the BCU put in consultation, the Pit-Cnt had warned that the changes that were intended to "boost retirements and punish women more harshly (by using unisex tables), but they would have success in making the business more attractive to insurance companies. "

Last night the representatives of the private insurers were analyzing the new regulations and preferred not to comment because changes had been introduced with respect to the initial draft that they still had to examine.

The same was posed to El País from the workers' representation team at the Social Security Bank (BPS), although they anticipated that "the resolved changes add more uncertainty to the annuity" that arises from individual savings. They also expressed concern that the BCU has not yet officialized the elimination of the 20% surcharge applied to the calculation of initial income as a way to compensate for the statistical mismatch that arises from using mortality tables several years ago (as was the case so far) , since that would be solved with the new parameters.