LA REALIDAD DE LAS AFP | ¿Qué elegir? ¿ONP o AFP?

Summary

This video explores the differences between Peru's two pension systems: the national pension system (administered by ONP) and the private pension system (administered by AFPs). It highlights how AFPs manage individual accounts for workers, with some critical insights into fees, investment practices, and the challenges faced by pensioners. The video criticizes the transparency and fairness of the AFP system, revealing that many workers end up with much less than they contributed. It also contrasts this with the ONP, which offers a fixed pension but with less flexibility. The video also includes an update about a merchandise launch and personal clarifications from the creator.

Takeaways

• 😀 The video compares Peru's two pension systems: the National Pension System (ONP) and the Private Pension System (AFP).
• 😀 The ONP is a government-managed system with a common fund for all contributors, while the AFP system uses individual accounts for each contributor.
• 😀 The AFP system charges high fees and lacks transparency in its investment practices, often benefiting private companies rather than the contributors.
• 😀 Contributions to the AFP system are used to create personal pension funds, which can generate returns based on investments, but these returns are not always favorable.
• 😀 One major issue with the AFP system is that even when investments grow, the money contributed by workers is not fully returned to them, especially after they pass away.
• 😀 An example shows that if someone saves 250,000 soles for retirement, they will receive diminishing monthly pensions, and may only fully recover their contributions if they live until 110 years old.
• 😀 The AFP system also allows a partial inheritance of funds, but the majority of the remaining balance stays with the AFP, especially if the retiree leaves behind a spouse or children under 18.
• 😀 The National Pension System offers a **lifetime pension**, but it is often very small and requires 20 years of contributions to qualify, which is seen as a disadvantage.
• 😀 Many experts recommend the ONP for people with low incomes or minimum wages, while the AFP system may be better for those with higher incomes, despite its flaws.
• 😀 The video also shares personal news from the speaker: the launch of new merchandise for his channel has been delayed, and it is entirely independent of his ongoing legal matters.
• 😀 The speaker encourages viewers to make informed decisions about their pension system based on their personal income and retirement goals.

Q & A

What is the difference between the National Pension System and the Private Pension System in Peru?

The National Pension System is managed by the government entity ONP, whereas the Private Pension System is managed by AFPs (Pension Fund Administrators), which are private financial institutions. The National Pension System uses a common fund for all contributors, while the Private Pension System uses individual accounts for each contributor.

How does the AFP system work?

In the AFP system, workers save a percentage of their income over a long period, and the money is accumulated in a personal account called the Individual Capitalization Account. The AFPs manage this money, invest it, and aim to generate returns for the worker’s future pension.

What are the advantages and disadvantages of the AFP system?

The AFP system allows individual accounts, giving contributors more control over their savings, but it also involves commission fees and investments in private companies. The downside is that AFPs sometimes do not provide transparency regarding how funds are invested and offer lower returns due to commission costs.

Why is the AFP system often criticized?

The AFP system is criticized due to the fees charged for managing pensions, the lack of transparency in how funds are invested, and the fact that individuals often do not recover the full amount of their savings, especially if they die early. The system also does not guarantee a stable income as pensions decrease over time.

What happens to a worker's money if they pass away?

If a pensioner dies, the remaining funds can be inherited, but the rules are strict. Only surviving minors or the spouse can inherit the funds. If there are no minors, the spouse may inherit a percentage, while the rest stays with the AFP. If there are no beneficiaries, the remaining funds are kept by the AFP.

How does the 'Retirement Programmed Withdrawal' option work?

In the 'Retirement Programmed Withdrawal' option, the pensioner's accumulated funds are distributed as monthly payments. However, these payments decrease over time, and the pensioner may run out of money before they die, leaving them with only a small fraction of their original savings.

What is the expected situation for a pensioner who lives to the average life expectancy in Peru?

If a pensioner lives to the average life expectancy (81 years), they may lose a significant portion of their accumulated funds. For example, in the case of a person with a fund of 250,000 soles, 35% of their funds would remain unused by the time they pass away.

Can a pensioner ever fully recover the money they saved under the AFP system?

It is highly unlikely. In most cases, a pensioner would need to live to an extremely old age, such as 110 years, to fully recover the amount they saved, as monthly pensions decrease over time.

What was the origin of the AFP system in Peru?

The AFP system was introduced during the government of Alberto Fujimori in 1992, shortly after his self-coup. It was designed to create a private pension system distinct from the state-run National Pension System.

How much money has been accumulated in the AFP system, and where is it invested?

By 2013, the total amount in the AFP pension funds exceeded 100 billion soles. The money is invested by AFPs in various private companies, but there is limited transparency regarding how individual contributions are invested.