National Pension Fund of the State Service Workers PENSIONISSSTE

GUIDELINES FOR SETTING UP AND OPERATION OF NATIONAL PENSION FUND OF THE STATE SE
RVICE WORKERS
- PENSIONISSSTE -
January 2008
Index
1. Market Characteristics facing PENSIONISSSTE • Strategic Definitions for PENSI
ONISSSTE
5. Defining Vision, Mission and Goal PENSIONISSSTE 7. Considerations Regarding t
he Operation PENSIONISSSTE
2
1. Market Characteristics facing PENSIONISSSTE
1.1 Incentives in the Savings for Retirement
Some features of forced saving • For various reasons (market failures, etc..) Wo
rkers have not shown to be sensitive to the different elements that characterize
the administration of funds for retirement (forced savings), notably: • • • 4.
performance, service commissions.
In general, a priori, there is a conflict between the interests which have on on
e hand: • Savers (workers in this case): Maximizing yield and value of its portf
olio under a certain tolerance for risk. • Managers: Maximize your profits.
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1. Market Characteristics facing PENSIONISSSTE
1.1 Incentives in the Savings for Retirement
Some differences between voluntary and forced savings • In the market for volunt
ary savings, the main tools with which savers have to get a proper balance betwe
en the interests involved are: • • • • determining the fee structure and yields
the ability of the sparing fund manager change at any time and even use those re
sources for other purposes (eg, consumption).
However, forced saving schemes all these elements is significantly reduced becau
se the worker is no possibility of leaving the system, until you have the right
to withdraw.
All this has led to: a) b) A low degree of market discipline in the industry. Se
rvices have not always been aligned with the interests of workers.
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1. Market Characteristics facing PENSIONISSSTE
1.2 Incentives PENSIONISSSTE
• The public nature of PENSIONISSSTE, unrelated to profit maximization, combined
with the fact that compete directly with AFORES provides a set of incentives th
at leads to focus on providing management services for retirement funds high qua
lity and seeking worker satisfaction. The PENSIONISSSTE should play a major role
within the system of retirement savings, better respond to the interests of wor
kers and inducing greater discipline in the industry. The Law of ISSSTE covers v
arious areas of opportunity related to the portability of pension systems. There
fore, the PENSIONISSSTE should become an engine for development of a National Pe
nsion System.
•
•
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1. Market Characteristics facing PENSIONISSSTE
Competition faced PENSIONISSSTE 03.01
• While some of the incentive problems related to the SAR have resulted, to date
, a low degree of competition in the industry, this will start to change as a re
sult of two major changes to the legal and regulatory framework: • Ban the commi
ssions flow, this better aligns the incentives of managers with those of workers
: a) It encourages the manager to increase the total resources under their contr
ol or balance. b) By charging fees on a single dimension (balance) considerably
facilitates the comparison between managers, thereby avoiding the confusion that
has prevailed in the choice of AFORE. • • More emphasis on net yield CONSAR rul
es to compare the performance of AFORES. With these changes take AFORES higher r
isk strategies to enhance the performance of your portfolio and increase competi
tion in the system (the industry will face will be competed PENSIONISSSTE).
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1. Market Characteristics facing PENSIONISSSTE
Competition faced PENSIONISSSTE 03.01
The PENSIONISSSTE manage the individual accounts of workers affiliated to the
ISSSTE exclusively over the next three years (except for those workers who alrea
dy have AFORE). Subsequently face open competition from the rest of the fund man
agement industry for the removal A worker member of the ISSSTE is very attractiv
e to any AFORE with the following: The average wage is higher than the con
tribution of members of the IMSS. Contributions to retirement insurance, unemplo
yment in old age and old age are higher than those of the IMSS.€The rotation (lo
w and high) of workers affiliated to the ISSSTE is lower than that of the member
s of the IMSS, which provides a more stable flow of capital over time. Contribut
ions are paid on time by the Institutions and Agencies, there is no avoidance or
postponement thereof.

AFORES actively try to find seven ISSSTE workers transferred them manage their i
ndividual accounts.
1. Market Characteristics facing PENSIONISSSTE
Competition faced PENSIONISSSTE 03.01
• PENSIONISSSTE must have the necessary elements to compete more actively with A
FORES as important in the affiliation of workers in the IMSS and ISSSTE retentio
n. While the relevant market for PENSIONISSSTE is wide, all kinds of workers, ex
ploiting the three years of exclusivity granted by Act to consolidate and entren
ch ISSSTE workers to serve the state as their main strength. As a medium term st
rategy PENSIONISSSTE should have all the necessary elements to become one of the
administrators of retirement fund's largest country. At a later stage, we sugge
st looking for other niche markets in the administration of other funds for reti
rement (provisional schemes and supplementary pension), and explored the role of
voluntary savings as a possible direct substitute for some of the current savin
gs alternatives financial support to the workers who have access.
•
•
•
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2. 2.1 Strategy Strategic Operational Definitions
• Challenge: PENSIONISSSTE will begin operations with more than 8 million accoun
ts and nearly 60,000 million pesos. Initial Condition: Currently, the Federal Go
vernment through BANSEFI a shareholder of an AFORE (Afore de la Gente). Strategy
:
• The PENSIONISSSTE receive the operational capacity of Afore de la Gente, which
has the approval and certification of CONSAR and may be scalable. It will seek
to have the possibility that customers are assisted within PENSIONISSSTE over 50
0 branches across the country BANSEFI.
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•
•
•
2. Strategic Definitions
2.2 Service Strategy
• • • Performance: to maximize the performance of the portfolio, with a horizon
of medium and long term. Commissions: set up committees to recover costs and mai
ntain sufficient operating reserve to meet contingencies. Services: provide high
quality and proximity to workers. For various reasons, the SAR has not promoted
enough interest among employees so that they are actively monitoring their acco
unts. With the new ISSSTE law this may be different, the following factors: • •
The average salary and contributions are greater than that of workers of the IMS
S, which favors greater interest of the worker. The component can scale signific
antly solidarity savings contributions, which would yield higher pensions at ret
irement. Workers will have a direct relationship of care and advice as part of P
ENSIONISSSTE. 10
•
2. Strategic Definitions
2.2 Service Strategy
Customer Model in three ways: • • Phone (CAT) Service Desk • • • Comprehensive C
are: We sought to use the BANSEFI branch network (over 500 branches across the c
ountry.) Care Information: through the ISSSTE and agencies.
Electronic Services is proposing to grant to all salaried workers affiliated t
o the ISSSTE a free electronic mail account and a unique key identification "cli
p", with which they can access the services of PENSIONISSSTE Internet and perfor
m their assignments (in review with CONSAR). This would reduce the possibility
of workers affiliated to the ISSSTE are subject to the problems of forgery and
involuntary transfers have been present in the system in recent years (since wor
kers with "clip" 11 can only be transferred by electronic means).
3. Defining Vision, Mission and Goal PENSIONISSSTE CONSIDERATIONS BASED ON THE A
BOVE DEFINED BELOW:
PENSIONISSSTE Vision
• The PENSIONISSTE, by its nature public, and their full participation in the Sa
vings for Retirement, is destined to become one of the administrators of pension
funds of major importance and a key element for promoting the development of Na
tional Pension System in Mexico, which has total portability of the pension righ
ts of workers. In this effort,€the PENSIONISSSTE try at all times to help its me
mbers access to a better quality of life in retirement, increasing domestic savi
ngs and promote the development of national productive activity.
PENSIONISSSTE Mission
• The PENSIONISSSTE's mission is to grant greater security and return on the res
ources of the workers it manages, so that they can access better pensions upon r
etirement.
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3. Defining Vision, Mission and Goal PENSIONISSSTE
Objective PENSIONISSSTE
• The PENSIONISSSTE aims to manage the resources of individual accounts for work
ers. In this task the PENSIONISSSTE institution undertakes to manage with effici
ency, honesty and transparency of the resources entrusted to workers, seeking to
distinguish the quality of service for workers, to manage public resources are
allocated according to the national and international best practices, and to obt
ain a mix of high performance and low cost that allows the worker to have a dece
nt pension. To this end, we intend to strengthen ties with the employee to consi
der their individual accounts as part of their heritage and a key element of its
strategy for long-term savings, through which it can earn higher returns to tho
se would have access to other financial instruments at their disposal. In turn,
PENSIONISSSTE investments tend to increase domestic savings and promote the deve
lopment of national productive activity. Finally, the PENSIONISSSTE must play a
decisive role in developing the fund management industry for retirement, promoti
ng more and better services and lower fees for workers as a whole.
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4. Considerations Regarding the Operation PENSIONISSSTE
Timeline
DECEMBER 2007 preliminary Pension Calculation December 31 JAN FEB MAR APR MAY RE
VSIÓN DATA - Simplified January 1 - April 15 - With documents in January 1 - Jun
e 30 Resolution Changing March to July, where the pension regime Election Septem
ber 1 January to 30 June (until September pending clarification if) end Clarific
ations ISSSTE provides information to the Ministry of Finance to issue the Bonds
(not later than 30 Sep, if November 30) SHCP Pension Bonds issued (no later tha
n January 31, 2008) 2008 JUN JULY AUG SEP DEC 2009 JAN OCTOBER NOVEMBER
I T E S S S
P E N S I O N I T E S S S
Process records the contributions of RCV and Housing (up to the issuance of pens
ion bonds) Commencement of Operations no later than April 1 Transfer SAR - ISSST
E 92 Initial Issue Opening Statement Individual Accounts (SAR - ISSSTE 92)
Issue Statements
Issue Statements
Separation of individual accounts and Non Bono's brother SHCP issued 14 Pension
Bonds
4. Considerations Regarding the Operation PENSIONISSSTE
Resources to be held with the Individual Accounts Administered by PENSIONISSSTE
Worker Characteristics
BOND ELECTION WORKERS PENSION SYSTEM TRANSIENT TENTH SAR-ISSSTE INITIAL BALANCES
SAR-ISSSTE 92 92 92 SAR-ISSSTE WAS ONLY IF ACTIVE IN 2007 SAR-92 ISSSTE
Deposits
DEPOSIT TOTAL TRANSITION BONUS ** * CV (TRANSITION) WITHDRAWAL (TRANSITION) DEPO
SITS RECURRING FEE RCV + SOCIAL SOLIDARITY RETIREMENT SAVINGS
ASSETS AT 31 MARCH 2007
NEW
N / A
RETREAT (TRANSITION)
RCV + COST SAVING SOCIAL SOLIDARITY
INACTIVE
N / A
N / A
N / A
* Contributions and matching contributions from 1 January 2008 and the date prio
r to the issuance of Pension Bonus Total Bonus = Bonus ** Pension & Retirement N
/ A: Not Applicable
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4. Considerations Regarding the Operation PENSIONISSSTE
Resource Allocation ISSSTE SAR-92
Workers Afore Assets Total Assets PENSIONISSSTE Inactive Account Number 273.558
1,866,442 6,060,000 8,200,000 ISSSTE SAR-92 Resources (thousands of pesos) 57,00
0,000 14,250,000 36,867,600 5.8824 million
NUMBER OF ACCOUNTS
1,866,442 273.558
14.25 million
RESOURCES (thousands of pesos)
5.8824 million
6.06 million
36,867,600
Source: Own Estimates
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4. Considerations Regarding the Operation PENSIONISSSTE
Investment Resources
Management Status Bonus Election Workers
SIEFORES of AFORE
Investment
Workers chose Afore Assets at March 31, 2007
Transient Tenth Bono
SIEFORES of PENSIONISSSTE BANXICO Deposit Account and is managed by their AFORE
SIEFORES PENSIONISSSTE
Workers who were affiliated to the ISSSTE between 1992 and March 31, 2007
Individual Account Opening PENSIONISSSTE
Transient Tenth
Inactive Workers to March 31, 2007
Afore chose Individual Account Opening chose Afore PENSIONISSSTE Individual Acco
unt Opening PENSIONISSSTE
BANXICO Deposit Account and is managed by PENSIONISSSTE
Workers who joined for the first time from 1 April 2007
SIEFORES of AFORE
SIEFORES of PENSIONISSSTE
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4. Considerations Regarding the Operation PENSIONISSSTE
Investment Resources
Siefore January 1956 Siefore 2 years or more Less than 56 years
INVESTMENT LIMITS
FIXED INCOME SECURITIES INCOME FOREIGN VARIABLE *
INSTRUMENTS STRUCTURED FIBRES
VAR **
80%
20%
0.6%
59%
20%
15%
5%
1%
1.0%
Siefore
Siefore 3 Less than 46 years Siefore 4 Less than 37 years Siefore 5 Less than 27
years
50%
20%
20%
5%
5%
1.3%
37.5%
20%
25%
10%
7.5%
1.6%
30%
20%
30%
10%
10%
2.0%
Investment
Banxico
Banxico Account
Appropriations by the Federal Government
* Up to 100% ** The disability that may have net assets of an investment company
, given a certain level of confidence in a given period
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4. Considerations Regarding the Operation PENSIONISSSTE
Care Workers ISSSTE SAR-92
"The workers claim their procedures in the branch network of banks that manage t
he accounts ISSSTE SAR-92-The procedures are sent to headquarters for finding th
e source 1. 3. The Correction of Data Unification and are processed through the
Unit or Entity Balances Retreats directly by the worker
Current Care ICEF (banks)
"The Contribution Receipts are generated bi-monthly and annual statements, both
are delivered to the address of the agency or entity (not the worker's home)
Direct-care workers through the provision of care or WEB-page applications proce
dures are met: • Integral Attention: Branch Network in BANSEFI (500) • Care Info
rmation: through the ISSSTE or entities and Dependencies
PENSIONISSSTE Care
"There will be requests for steps that could be solved directly in the Care Poin
ts and others who should be sent to headquarters for approval PENSIONISSSTE and
processing-Statements are generated twice a year and sent to the address of the
worker or Email
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