AFP Capital takes pension planning online

Through new technological tools like Pension Scanner, the Chilean pension fund manager AFP Capital will deliver its promise to be a savings advisor to its customers


AFP Capital, a company with almost 30 years in the pension market, has a clear mission – to help shape its affiliates’ future. The firm belongs to SURA Asset Management, which is a Latin American company with pension, insurance, mutual fund, and stock businesses in Chile. With more than 1.3 million affiliates and $32.3bn in AUM (as of September 2013), AFP Capital ranks third among Chile’s pension fund managers.

Regarding its direction, General Manager, Eduardo Vildósola, said: “Our commitment is to build a long-term relationship with our affiliates in order to guide them in achieving their ‘number’ along their life cycle. This ‘number’ is the total savings reached along their working life, [which is] intended to finance their pension.”

During 2013, AFP Capital was especially focused on its brand promise: to be savings advisors to its customers, which, for a company strongly focused on providing the best possible service, means building the best pension for each individual case. Accordingly, the company has focused on improving the empowerment of its customers, that is to say, educating them and providing as much information as possible in a simple and clear way, so as to gain their trust and loyalty for a long period of time.

Setting the industry standard
“As results from pension saving schemes will be seen 25 or 30 years after the policy is formed, the pension fund industry employs long-term cycles. Therefore, making decisions promptly is critical, and at AFP Capital we are well aware of this, so we want to help our customers from their first contributions onwards,” says Vildósola.

“In order to deliver the highest and most tangible value to our affiliates, AFP Capital decided to innovate and create the Pension Scanner, which is an online tool intended to both inform our affiliates and promote voluntary savings. The Pension Scanner provides a clear picture of each customer; emphasises the importance of completing their monthly contributions; provides them with tools to do so, and in case of pension contribution gaps promotes voluntary savings to cover them,” says the general manager.

“In just three months since its launch (October, 2013), about 400,000 customers experienced their customised Pension Scan and more than one thousand of them contracted a voluntary pension plan.”

“Investment performance, service and efficiency are the three basic pillars of our company, but we believe that in order to become a reference for the industry and to reach a leading position, differentiation should be our fourth pillar. This can be achieved through pension education by means of a tool like our Pension Scanner and our brand promise – to be savings advisors,” adds Vildósola.

“By 2014, AFP Capital plans to release a new version of our Pension Scanner in different technological platforms, fully integrated into the DNA of the company. AFP Capital has been a pioneer in creating a tool like this, through a simple language and clear message that educates customers. We know it’s a long-term task, but we are committed to this path.”

The system in Chile
The Chilean pension system, in place since 1981, is based on three pillars. The core pillar is the contributory pillar, composed mainly of mandatory savings based on personal effort (10 percent of gross income with a cap of approximately $3,100). Until 2011, only dependent workers had an obligation to contribute, but since 2012, the self-employed – 1.5 million people – have been gradually added, albeit under different conditions.

Six pension fund managers in the Chilean market have total AUM from mandatory savings to the amount of approximately $145bn

Six pension fund managers in the Chilean market have total AUM from mandatory savings to the amount of approximately $145bn, allocated into five types of funds (called multi-funds), which are divided by risk, and among which affiliates can freely assign their contributions. This free choice is gradually restricted in favour of the less risky funds as people approach their retirement age.

The second pillar is the solidarity pillar, which considers state aid for low-income affiliates who fail to obtain some kind of pension or whose pensions are inadequate to cover their basic needs. And the third pillar is the voluntary savings pillar, intended for people to freely assign part of their income to increase the self-financed mandatory pension or retire early.

A discussion is currently being held in Chile after the government announced a plan to reform the pension system. Increased life expectancy, rising individual contribution rates and retirement age are among the main factors considered in the reform.

“In general, we estimate that Chile has to move on to a 16 percent individual contribution rate, which would be in line with the OECD average rate, and there must be a mandatory and voluntary component,” says Vildósola.

If this scheme were to be implemented, a particular challenge would be the retirement age of women (at 60, five years earlier than men), who have smaller pensions because of several factors: mainly more pension contribution gaps, better life expectancy, and on average lower incomes.

In this regard, AFP Capital has publicly promoted the idea to include these topics in the public-private agenda, in order to responsibly address them. Consequently, AFP Capital does not rule out any of the alternatives proposed as solutions, including those by the OECD, the IMF and the IDB, suggesting the increase of retirement age and individual capitalisation.

“More importantly, we insist on the assessment of mechanisms intended to strengthen voluntary savings, mainly group Voluntary Pension Savings (APV), which is intended for low-income workers and have not been successful because of the lack of appropriate incentives. This sector is less protected and, at the end of the day, it can become a state burden through the solidarity pillar. Meanwhile, for the high income affiliates, the path is clear: make the voluntary savings pillar grow,” says Vildósola.

the effects of pension fund systems on a country’s Gdp

The recent study ‘Contribution of the Private Pension System to Economic Development in Latin America; experiences of Colombia, Mexico, Chile and Peru’, commissioned to leading economists of the region by SURA Asset Management, presented revealing statistics on the impact of implementing the individual capitalisation pension system on the GDP of these countries.

According to the conclusions released in a book under the same name, while the impact of the individual capitalisation system is positive in all of the countries analysed, there are differences that can be explained by: the design of the pension system; the individual capitalisation system and its transition; the macroeconomic environment; the improvement of regulation; and labour market characteristics, among others.

Andrés Castro, CEO of SURA Asset Management, said the study confirms that, “there is a virtuous circle between pension systems and the development of the economies in which they are embedded.”

In the case of Chile, the research determined that the implementation of an individual capitalisation pension system has had a positive impact of 8.55 percent and 8.08 percent on Chile’s GDP, considering the percentage of the GDP growth amounts to 4.58 percent annually from 1981 to 2011 (see Fig 1).


After the creation of the individual capitalisation system, there has been a significant increase in national savings, reaching levels of around 25 percent of GDP, well above the historical figures (around 15 percent). Between 1981 and 2012, the flow of mandatory pension savings averaged 4.86 percent of GDP, and the reform implied an increase in total savings of 3.11 percent of GDP.

Regarding other countries, the highest GDP growth rates driven by the implementation of the pension system were in Mexico (12.9 percent), followed by Colombia (12.75 percent), and Peru (6.22 percent). It should be noted that there are some methodological differences that prevent comparing these results strictly with those of Chile, but they provide orders of magnitude.

The study sought to be a contribution to the debate through a quantitative assessment of the macroeconomic effects of pension reform in each country. In order to do that, the impact of the creation of individual capitalisation systems on the growth rate and GDP level was estimated through four main channels: savings and investment, employment level, employment structure and labour productivity, which jointly, with the development and efficiency of the capital market, positively impact the total-factor productivity.