Structured Settlement Annuity Companies

Structured Settlement Annuity Companies

Structured Settlement Annuity Companies

To date, more than 500,000 people in our country have opted for the Annuity to receive the payment of their retirement, a mechanism that has gained participation in recent years compared to the other option offered by our country.

The planned retirement we want to analyze why this phenomenon happens and what ways are there to increase the average monthly amount that our retirees receive, that is why Jose Manuel Campuzano, president of the association of insurers of Chile Companies us or they die thank you very much for being in the economic agenda of technical asia and I hope to invite myself to start from the base because it seems to me that financial education is very important and obviously in our retirement it is very important how an Annuity works that as we said it is one of the two ways to receive the payment of retirement versus scheduled retirement.

Well, the Chilean pension system designed you in two stages, a stage that is the active stage and a stage that in the passive stage in the active stage the workers necessarily save 10% of our salary and we also have disability and death coverage and it is that while we are saving this a death does not occur. 

A situation of disability and we have the right to care during the entire active period, whether as a fund when the person decides to retire who can decide to retire at any time, provided that a certain condition is met and that condition is that the pension to be obtained is greater than the average of your income in the last 70 percent of your income in the last 10 years. 

At that time when the person decided to retire has two options an annuity or a programmed retirement annuity means that he transfers his funds to a life insurance company and that life insurance company is going to pay a pension for life in ufc constant depending on the accumulated amount and also the life expectancy that exactly exists in the country absolutely concept the insurance company has certain technical calculations and in function did not accept the life expectancy of the insurance work with the law of large numbers depending on of the expectations of the population at that time and based on the interest rate that at that time will calculate how much the pension that can be granted to the person the other alternative he has is a programmed withdrawal in which he leaves the funds in the fp and withdraws quotas from that fund as long as it is kept alive.

On the annuities as the mechanism operates when a person decides to retire and goes on the annuity, they must personally choose the insurer that suits them best, that there is a unique mechanism that was designed a few years ago that includes the annuities and the programmed retirement in which the person when he decided to retire will be given that road background to an institution is believed to be a company created between the afp and the insurance companies called is how the system of inquiries and offers of heaps is exactly this system receives that information, it is sent to all insurance companies and all insurance companies in an electronic offer and you receive an offer that is a list of all the insurance and pension companies they offer depending on your fund and you you can opt for any of them having absolutely transparent information of all the possibilities of retirement that has.

José Manuel who is better for a life annuity? For example, in front of a scheduled withdrawal to someone who may not have so much financial knowledge and feel calmer receiving a fixed monthly amount for life in front of someone who with a scheduled withdrawal may have a higher quota than being able to make use of that money How could you choose an annuity have two great characteristics, the first in simplicity and the second in security.

Simplicity because I know how much my pension in walnuts for my whole life and that will never change security because any swing in the financial market in which the stock rises may raise interest rates more than in the rates between more than in the shares or there can be any change in the longevity of the population any number of years and I will always keep my pension constantly.

Surely it is a bit the logic of the afp system that says that when one was ten years before retirement one cannot be in the most risky funds but rather the most conservative ones precisely to not risk their funds I have a little more that logic and the logic of the afp exactly when you had little time to retire some risks the funds that you have accumulated but in the case of the annuity you make the decision to buy at the moment you decide to retire and transform your fund into a pension at 920 or s30 cfu of your boss and you know that during all the years that you live you will receive that amount in uefa permanently jose manuel in the introduction i said that they recapitalize them gained market share in recent years people who are in the house are invited to see how the annuity numbers have been in the last time if in 2007 18 thousand 120 new pensioners chose an annuity that number was constantly growing going until 2014 to 28 thousand 94 people in 2012 there were about 29 thousand 151 should be because no more pressure. 

They just happened this year now as we see in front of the programmed retirement follow in 2007 there are 18,000 this 6 thousand people in programmed retirement was equated enough in 2010 but since 2002 to date more people chose the annuity compared to the programmed retirement this is because people They want to be safer and that has actually increased in recent years these two characteristics of the annuity of simplicity and security in the reason why today on average throughout the time that we have in the pension system approximately two thirds people opt for annuity a third opt for scheduled retirement that percentage this year has increased considerably and this year about 75 percent of people are opting for annuities another way of looking at it is that the person is noticing the capitalist because also the monthly payment is greater let's see the following graph that also shows us how they are the amounts that for annuities and also the retirement programmed in the last years this also has as a database the score that we talked about recently if in 2005 the annuity in average amount in effect for pensioners this is a monthly amount then given to 37 efe for each person the programmer withdrawal 50 7% as we see those amounts in the annuity.

They were increasing year by year until they reached last year where the average was paid per month 10 13 efe for retirement almost double that of the programmed retirement because we have this difference jose manuel to the first important thing to note in that graph is how the annuity It is increasing year by year despite the fact that longevity is also increasing of course and that has to do with the fact that more and more people make voluntary pension savings or they realize that saving the mandatory 10% is not enough and they do an additional voluntary saving with tax advantage that is the ape of and also for the returns is not true that they are having the funds in the fp in the last periods that will be the alavés adds to the amount of the afp that we all do obligatorily and all that forms a large amount that goes to the annuity. 

If so, with the moment of retirement, I add the savings funds, I make in a mandatory way more the funds that I have voluntarily saved and with these funds with but not true, I opted for a pension in a security company, now you talk about the investments that you make the insurers how is that system so that precisely in addition to the payment of nine fixed there is also an interest rate that depending on the yields that the insurer obtains also generate better pensions better retirement payments after the Chilean ones good. 

Life insurance companies as a result, except for annuities, are today the second most important institutional investor in this country, about 50 million dollars invested, of which 15 million dollars are invested in corporate bonds 7 in the foreigner 7 in the development of real estate and 87 the deposit or bond bank bonds the financial stability of a country depends on a developed financial market and in that sense we have had an important role as an industry.

insurance company, especially in developing the long-term financial market in Chile, what the insurance companies are looking for are instruments of the longest term possible and in that sense there is a certain virtuous circle with the annuity because the life insurance companies as a result of annuities have been large investors or developers of real estate development in Chile through real estate loans mutual mortgage projects mortgage bills etc. 

and also large infrastructure investors that are companies or people who need long-term financing and fits perfectly with the needs of the Companies of assurance that you as a guild have made a call that you want to invest more in concessions that have made the call of the government to precisely offer more concessions to the private sector absolutely we make a call to make a certain infrastructure and development policy Structure 2.0 for no one, not a mystery, it is not true that Chile is falling behind in infrastructure, we are falling behind on roads, we are not falling behind in ports, it is a matter of comparing with the investment in port that Peru is making, for example, prison hospitals, etc. 

A series of infrastructure investment needs today to reach Santiago ports is almost a shame. It is not true because it was left behind in terms of investments and the insurance companies Díaz is a consequence of life annuity we propose to make a new investment policy a watch a wing 2.0 concept of infrastructure investment policy and hopefully we can develop even an instrument Long-term investment at 40 50 years percent terms in which the needs of these companies perfectly fit from a financing point of view with the investment needs of the insurance industry and the logic of these of the insurers' investments is Not only to meet the fixed amount that the Senate desires have to pay, but also if the investments are getting better and give more profitability to offer a better interest rate precisely to that annuity as we have more investment alternatives we can obviously increase the interest rate and increase the interest rate we increase We love investments and reduce the risk of reinvestment.

Jose Manuel has one last question I do not want to miss because he has the book the scanner to annuities successes risks and great opportunities for the future to do so in summary what is the main recommendation the main request the main message that you as insurers of Chile wants to send through the book just published we are editing this book that is a book made by independent experts. It is a contribution to the technical discussion to the Chilean pension system. 

All these experts analyze this of the life annuity alternative as an investment alternative in Chile and propose some improvements not to be touched. Everything is all improvable and there are certain things that we can improve in The case of profitability, such as developing new product alternatives such as variable annuity is to make, is the main improvement that you propose is one of the improvements proposed in the book, there is another, for example. 

the topic of infrastructure investment and another not certain proposal and is to change the limit on investments from abroad that have the insurance company would say that it is 20 percent comes from a law of 1931 understand that the financial market has changed a lot since those years then and more investment alternatives are required to increase pensions because in the end all that ultimately results in improving pensions well I imagine that you like us here in the program are very attentive to what the brabo commission can propose to improve pensions In Chile at some point they will have to present their report so we will be attentive and there we will be speaking again with the association of insurers jose manuel campuzano thank you very much for being with us women spying on it well and with this analysis of the annuities in our country we finish this Thursday in the program as always I invite you to continue with us here in ceme nto.