"Taximeters keep running and the faster people start saving, the faster the problem is." Francisco Murillo, CEO of Sura Asset Management Chile, is so stressful when he refers to the pension reform being discussed in Congress.
According to the exercise, the reform has the right incentives and the pillars on which it is built are the right ones. However, it indicates that there are aspects of the labor market that should be considered. "The first point is participation in the labor market. The section that runs between 60 and 65, for example. Women as another problem, because women's pensions are much worse and it has to do with job security and 30% pay gap between men and women. And thirdly, the question of the independent, they are 2.2 million, if they were all independent, there is a solution, but those who come and go or those who work on new platforms are a world, that will change very quickly "says Murillo.
Does the project set it up?
-Incentives are generated to postpone the retirement age that is online. In mathematics they are interesting, because after a pension year the pension has increased by 9%, just to spend a year contributing more. And then there is the incentive to quote, in this line is that people work and quote more time, and the independent are in the second project that has a transience.
What do you think President Piñera has said he is open to increasing the price up to 18%?
– The basic thing is patience, and if you want to reach 8% it is longer than 4%. This is linked to the labor market, if one does something and eventually touches it, the equation is compensated.
Is 18% affordable?
-It's the number suggested by Ocde, we have to go there. And the same thing happens when we look at women's labor market participation, we are 49%, and in Ocde it is 60%.
And at their low labor market participation, they add that they live 10 years.
– This is where we return to the subject of the elderly. Women aged between 55 and 59 participate in 58% of the workforce. From 60 to 64, ie. after retiring, this figure falls to 44% and from 65 to 69 years it falls to 25%. A 63-year-old woman compared to a 58-year-old woman with regard to her work capacity is also valid. Then you could ask if they decided to leave, or the market took them out. There is a very thick point, today women go on average to 61.8 years, ie. there is exposure.
Is it saying that while they can decide, do they postpone it?
– That's right, and we've worked a lot with employers to try to make it visible. Age should not be a subject. Companies implementing retirement plans at the time of retirement age are met, this is not very clear.
Is 8% rather than 4% much more effective in retirement to tackle this problem in the labor market?
– If pensions are better, we will have a much more sustainable business. And in another point when making the number of 4% raised in the law is very interesting.
-In a period of five or seven years you can end up with a volume higher than what the APV industry manages.
Want to be interested in managing it?
-Yes, and I'm sure if the competition opens, there will be interest. But at least you will have a transient, and if you say 8%, it should be a transient for the first 4% and another for the remaining 4%.
How do you see the discussion in Congress?
– We are optimistic, as much as the reform of Bachelet as that of Piñera, they have the same pillars, therefore, as before was government, and now they are opposition, and vice versa, they must reach agreement. But I agree with one point that it is not possible to approve separately the increase of the contribution and the supporting pillar. Ultimately, there is a subject of tax expense triggered if the solidarity pillar is approved before the 4% grant increase.
What happens if the reform is not approved?
– Pensioners increase by 10% per year, if a reform is not approved, we will have 40% more pensioners with pensions equivalent to those they have today for four years. But it will be 40% more than older people. Today, they represent 12% of the population in Chile, but by 2050 they will reach 24% and those who retire in that year are already quoting.
How do you see the biggest competition the project introduces?
-The field is open. As a first point, "welcome the competition" and, as another element, "equality of rules", it is fundamental. And there is a third element: simplicity can help make pensions better.
Can the physiognomy of the industry change?
-You must look at the APV. Initially, the AFP had it, and it was not a business, it was rather a complementary element. But when the reform took place and it began to charge competitively because other players stepped in, an explosion of the market came. It's a good example, and I think you should look at what happened.
The stock market and Enel
How do you see the discussion about removing the tax exemption for capital gains tax?
-For example, if we see today, the Peruvian market is super illiquid, even though they replaced the exception. Tax on capital gains, if taxed on dividends, then the capital gain will be a double tax because people pay on dividends.
Does it affect money and people?
– Absolutely, because there is an important point that is the incentive to save people. There is a lot of talk about the incentive to invest, but a little about people.
Is it sensible to have a liquidity market thanks to a tax exemption?
"This is where Hacienda works, to make Chile a finance center because a liquid capital market ends up creating two effects: the economic growth problem because one thinks that a low funding cost comes magically and the other is the question of quality work.
Another topic taken on the market agenda is the capital increase proposed by Enel Américas. How do you see it?
-It is a topic that is managing AFP Capital's investment group (who considered the capitalization to be lower), but I would say I agree with the arguments. Ultimately, the debt level that would remain if a specific operation of the proposed size is indicated is too low relative to its peers. If you make a capital increase with a smaller size, you are better off. But it is good that Enel Americas will invest in the opportunities that can be given.
"I would not rule out that growth at any point in the margin will be directed upwards"
How do you see the economy this year in an international scenario with sounds, while local level closes emblematic companies?
-In 2018, we saw growth, but employment advanced less than we could have expected. Now, it is true that the growth of 4% is the result of investment, and that product has its team that comes into force in 2019. We are relatively optimistic, one reason for this is that a possible recession in the United States moves away. , the commercial war cleans up and that for Chile is important. I would not rule out that at some point I could create growth in the margin directed upwards.
Last year, the investment of people, insurance with savings and FF.MM. It grew more or less to 3%, below 8% and 12% of previous years, which had to do little with the execution of the assets. We believe this can be reversed, because ultimately, the growth of people's savings is related to income and aging. Resident, because when they are older they save more.
Meanwhile, formal employment, which has an impact on AFP, has had a reasonable level of growth, and this year a dynamic level could be maintained.
But despite the dynamics, we are in a world with low prices, which affect annuities and return on funds.
– Interest rates are influenced by structural reasons, such as Digital platforms that reduce costs. The answer to this is alternative assets that you need to evaluate well, they have an investment philosophy that is different from liquid assets. AFP invests heavily in processes and equipment because it is the way.
What are your plans for this year?
-We have increasingly positioned our brands. The group has been here for six years. In the AFP business, we have a share of close to 19%. This company must be very good this year because we had good results in the funds' profitability.
How good should he go?
-The most important thing is to maintain the quota and above all work hard when our customers are well-informed, understand the reform, see where we are going and we move towards a digital attention. Two thirds of our AFP is digital attention.
But in the savings and investment business we have a challenge we want to grow more than the market, we invest a lot today, we have 500 business leaders. It is a market where there are opportunities for growth and it is linked to pensions.
Life insurance with savings: "It is a change of criteria (of SII)"
What did you think of SII's decision that life insurance with savings should be taxed?
-Some in its tax subsidy to the revenue business in 2019 established certain obligations for insurance companies and life insurance customers with savings, which basically indicates that the capital gain of repurchases should be taxable. We do not agree with this interpretation and we believe that it is a change of criteria that has made us protection. Basically, we look at customers because we understand that there is an advantage today and there are certain ways to change criteria. Now we are engaged in what justice suggests.
How has this market been affected?
– Since this began, there was a sharp slowdown. Growth in savings reserves was 3% in 12 months to September, and if you look before, it has grown by 12% and 15%. It's a big downturn, and customers are asking and have taken a very cautious, wait-and-see attitude.
Was there use of this tool?
– Today, there are 400,000 policies, it's a relatively big problem, but I return to this about the incentives to save people. This is it. It is an incentive established in law, and I would say that it is one of the few left to save people because they have been cut.