The new, more relaxed set of rules recently announced for Chile's employer-sponsored pension plan (APVC) segment will give a boost to a dormant market, especially those regarding the so-called vesting process, Ohio National Seguros de Vida chairman Ignacio Montes told BNamericas.
The APVC market debuted October 1, 2008, as part of a pension reform that former President Michelle Bachelet signed into law in March that same year. However, market players blamed tougher-than-expected regulations for its slow start.
Earlier this week, Chile's pension, banking and securities and insurance regulators issued a new set of rules for APVC accounts - which are similar to 401k pension plans in the US - that took into consideration opinions by potential players.
Under the new rules, employees will be able to claim funds chipped in by their employers as their own in their APVC accounts after five years, instead of two. This is known as vesting. The 24-month period was considered too short by local companies, as it was seen as a disincentive for talent retention.
Employees will also be able to claim these funds 24 months after their first contribution if they are still working for the same company, according to the new rules.
According to Montes, the insurance industry proposed extending the vesting period to at least 48 months, but the regulators chose an intermediate alternative that will start operating in June.
"The new conditions are better than the current ones given that all contributions are immediately moved to the 24th month and future contributions become full property of the employee on the fifth year," Montes said.
The new rules also include lowering the minimum percentage and number of employees that will be required for a company to offer APVC plans, to 15% and 100 employees from 30% and 300 originally.
According to experts, the APVC market could generate as much as US$600mn over the next few years.
Pension fund managers, banks, insurers, mutual funds and brokerage houses can offer APVC accounts.