Union: El Salvador pension funds losing hundreds of millions this year

The low profitability of investments made by pension funds in El Salvador has led workers to lose US$140mn this year, according to union group COMTRADEFOP, La Prensa Gráfica newspaper reported.

Workers' savings are managed by pension fund administrators (AFPs). But in 2006, a law requiring AFPs to put the investments into government debt called pension investment certificates (CIP) was created. Over time, US$58 of every US$100 of pension assets have been invested in CIPs, which has generated a return of 3%, down from previous levels of 12%.

In 2013, COMTRADEFOP filed a lawsuit in the supreme court to remove the obligation to invest in CIPs.

In December last year, judges ordered all those involved to seek a way to improve the return on investments for pension fund assets. But this year another US$500mn was invested in CIPs, which continue to return just 3%.

"Because of the failure to comply with the ruling, workers have lost US$140mn," Enrique Anaya, legal representative for COMTRADEFOP, was quoted as saying.

According to Anaya, that number could reach as high as US$400mn.