BRAZIL - The private sector pension industry in Brazil is concerned new legislation allowing unions to set up their own pension funds will have damaging ramifications for the pensions industry as a whole.
Under new rules introduced by the government earlier this year, unions or syndicates are now permitted to create their own pension funds in which their associates can choose to invest.
Eduardo Freitas, executive director of private pension administrator MAPFRE, said the private sector was concerned likely weak performance would effect the Brazilian pension industry as a whole.
“We are concerned that the union funds will not perform very well, they are not secure to investors and in a very short time, they will show some problems,” he said.
Freitas insisted the private pension industry’s objections were not linked to the threat of increased competition.
“We are not concerned about the competition that comes with these funds, we are concerned about the performance that would impact the pension funds in general,” he said.
“Many of the associates of the syndicate or union will invest their money in these funds and this money will be under the syndicate or union administration which do not have a very strong governance and compliance system.
“We believe that investing their money in a traditional closed or a traditional open fund, that these two traditional options will offer in the end a better service or a better return on investments than the new funds.”
Meanwhile, new tax regulations removing the current 12% tax on employer contributions and reducing the tax on earnings over time are set to come into effect in January.
The Brazilian Congress failed to meet a November 30 deadline to make changes to the government proposal which means, under Brazilian law, it will go ahead unaltered.
The Pensions Regulator (TPR) has granted 11 master trusts extensions to apply for authorisation, as it confirms it has received 22 applications ahead of the 31 March deadline.
Aegon Master Trust, Fidelity Master Trust and Ensign have sent off their authorisation applications to The Pensions Regulator (TPR).
Self-administered pension funds spent £15bn on payments to pensioners in Q4 2018, but received just £12bn in contributions (net of refunds), Office for National Statistics (ONS) data reveals.
Aberdeen Standard Investments (ASI) and Gresham House are to team up to form a joint venture.