In the midst of a scenario in which the world’s economies face higher inflation, high interest rates, a stronger dollar and the risk of a further slowdown, Colombian pension savings have also shown in recent months devaluations typical of a situation of great volatility such as the current one.
(Pillar system, Fedesarrollo pension proposal).
According to the most recent Asofunds report (cut to June), the total balance in mandatory pension funds reached $335.1 billion; Despite the volatility scenario, the balance grew by 1% compared to what was seen in the same period of 2021.
“In an environment as challenging as the current one, we tell affiliates that days, weeks and even months of devaluations should not make them uneasy, since pension savings, being built up in years, must be analyzed over broad time horizons where they always see and will see significant returns” explained Santiago Montenegro Trujillo, president of Asofondos, a union that brings together the four administrators of pension and severance funds (Colfunds, Future, Protection and Skandia).
(Pay attention to the status and management of your pension contributions).
This is how Montenegro revealed that the savings owned by 18.4 million workers, at the end of June, showed returns of $43.4 billion (period of the last two years), while, in the last decade, profits reached $155 .6 billion. Of the total savings ($335.1 billion), 64.6% corresponds to returns generated by the management of the pension fund management companies (Colfondos, Porvenir, Protección and Skandia).
Additionally, the economist recalled that 2020 and 2021 were two exceptional years, with historical returns that reached the individual accounts of workers in an amount close to $59 billion, “These returns correspond to the average earnings behavior that we would have seen in five years. In other words, in these last two years, despite the challenges faced, such extraordinary gains have been achieved that they have provided an important ‘cushion’ that makes it possible to compensate for times of ‘lean cows’ such as those seen at this time, as well as adding for future pensions.
The Asofunds report shows that pension funds continue to be the scheme preferred by most workers to build their pension savings. Thus, at the end of June, 18.4 million affiliates were registered, with an increase of 5.4% compared to the first half of 2021.
The average age of these workers is 35 years, or, put another way, eight out of 10 are under 45 years of age.
For the majority of affiliates who are young, these periods of great volatility, although they affect their profitability in the short term, “They offer very good investment opportunities for their resources and, therefore, better returns in the long term, that is the other side of the coin in situations like the one currently being experienced globally. In other words, we have opportunities to buy cheap”, assured.
For their part, those who are about to retire or are already, have been building their savings for many years, so they should not worry about the profitability of recent months, instead, it is recommended that they look at the total profitability that their savings have produced throughout life.
Asofunds said that in the face of depreciation cycles, it should be remembered that the investment diversification strategy allows savings managers to mitigate or compensate the depreciation of some assets with the appreciation of others, “That is why the administrators have highly diversified pension savings, both with investments outside and inside the country.”
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