By Craig Thorburn, Roberto Rocha, Hela Cheikhrouhou, Heinz Rudolph
This paper offers an evaluation of the funded pension procedure and the standard of the regulatory framework for either accumulation and payout part. It means that the shortcoming of portfolio diversification could give a contribution sooner or later to low returns and terrible pensions and gives a few thoughts to extend the possibilities of investments to pension cash. The paper additionally unearths that pension fund directors will not be exploiting the dimensions economies in definite components of the enterprise comparable to number of sales and account administration, and proposes mechanisms to lessen bills and bring up potency via higher festival. The paper examines the goods and ideas provided at retirement age and unearths a bias towards the cost of pensions within the kind of lump sums and indicates possible choices for bettering the supply of alternative tools. improvements to the regulatory framework of insurance firms also are proposed.
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Additional info for Financial Sector Dimensions of the Colombian Pension System (World Bank Working Papers)
Sample text
Second, it is calculated on a sample of 36 months, which provides a longer horizon for the evaluation of portfolios, compared to countries like Argentina and Uruguay where the sample period is 12 months; and third it is evaluated on a quarterly basis, which also gives additional flexibility to pension funds in comparison to the rest of the countries of the peer group where evaluations are conducted on a monthly basis. However, it is important to notice that the longer the sample period the higher the probability of bankruptcy of the AFPs when the band is triggered.
Note that relative performance is entirely determined by relative returns, as these AFPs charge essentially the same fees. Table 20. 3% 100% 100% 100% 100% 100% 100% Source: SFC. 100% 100% 100% 100% Financial Sector Dimensions of the Colombian Pension System AFP 27 28 World Bank Working Paper Table 21. 3% Source: SFC, Word Bank/IMF. Table 22. 0 Colombia 2005 data from AIOS. Source: AIOS and SFC. 6 ROEs of AFPs in Colombia are in line with those in other Latin American countries. As shown in Table 22, the AFP industry has been highly profitable in most countries, and has been able to recover its initial costs within relatively few years of operation.
PW payouts can be manipulated, and retiring workers do not get easy access to PW and annuity quotes by different providers. A retiring worker has to rely primarily on the advice of his/her own AFPs. Regulations do not prevent the manipulation of initial PW payouts, as noted above, nor do they prevent the customer from being directed to the life insurance in the same financial group of his/her AFP, regardless of whether this company is offering the best annuity quotes.