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GLOSSARY OF TERMS

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GLOSSARY OF TERMS

A

Agreed Deposits:

Employer Contributions made to the worker’s capitalization account, periodically or occasionally, based on a prior agreement between both parties. The purpose of these savings is to increase pension amount or to anticipate retirement.
ARGENTINA and CHILE: it is not considered as taxable income.
DOMINICAN REPUBLIC: they are called “Aportes Voluntarios Ordinarios (Ordinary Voluntary Contributions)” and they are made periodically.

B

Beneficiary:

A person who, by being a member or by his/her relationship with a member, is entitled to receive a certain service or protection once the requirements established by the law have been fulfilled.
BOLIVIA: A Bolivian citizen, resident in the country, who had reached the age of legal majority by 31st December 1995, is a Beneficiary.

C

Commission:

Sum of money received by the AFP to provide Individual Account administration services. Each administrator company will freely set the amount, which will be the same for all affiliates. There are diverse commission types that the AFP may charge, which will depend on each country’s regulations.

Commission, Fixed:

Fixed monthly amount paid by each affiliate. It is taken away from his or her individual capitalization account.

  • ARGENTINA: may be used to remunerate registration of mandatory contributions and/or registration of voluntary contributions and agreed deposits and/or payment of scheduled withdrawals.CHILE: may be used to remunerate deposits of periodic contributions and/or individual account balance transfers and withdrawals.
  • URUGUAY: may be used to remunerate registration of mandatory contributions and voluntary or agreed deposits.

Commission, Variable (% of taxable income):

Comisión que se cobra mensualmente al cotizante y corresponde a un porcentaje de su renta imponible.
Monthly commission charged to the affiliate as a percentage of his or her taxable income.

  • ARGENTINA: may be used to remunerate registration of mandatory contributions.
  • CHILE: may be used to remunerate deposits of mandatory contributions.
  • DOMINICAN REPUBLIC: it is known as “Comisión Administrativa (Administrative Commission)”.
  • EL SALVADOR: may be used to remunerate administration of individual pension savings accounts and the disability and survivors insurance contract; administration of individual accounts of pensioned affiliates or affiliates who, while meeting age requisites, do not exercise their right and continue making contributions.
  • MEXICO: they are called “Comisión sobre Flujo (Commission on Flow)”. May be used to remunerate fund shares’ deposit and contributions to the Retirement, Unemployment in Old Age and Old Age subsidiary account, excluding the social share.
  • PERU: may be used to remunerate mandatory contributions deposits.

Commission, Variable (% of administered funds):

Monthly commission charged to the affiliate as a percentage of funds in his or her individual capitalization account.

  • ARGENTINA: may be used to remunerate scheduled withdrawal payment services.
  • BOLIVIA: may be used to remunerate portfolio administration services.
  • DOMINICAN REPUBLIC: it is called “Comisión Anual Complementaria (Complementary Annual Commission)”, equal to 30% of funds’ return above commercial banks’ certificates of deposit return.

Commission, Variable (% of administered funds’ return):

Monthly commission charged to affiliates as a percentage of the return produced by administered funds.

  • EL SALVADOR: may be used to remunerate administration of individual pension savings accounts that have been inactive in excess of one year without interruption with balances higher than one hundred minimum wages.

Commission, Variable(% of monthly pension):

Monthly commission charged to pensioners as a percentage of their pension.
EL SALVADOR: may be used to remunerate programmed income administration.

  • PERU: may be used to remunerate the process of granting temporary and scheduled withdrawal pensions.

Commission, Variable (% of amounts involved):

Commission charged on the basis of the amounts involved in the operation.

  • ARGENTINA: may be used to remunerate registration of voluntary contributions and agreed deposits.
  • CHILE: may be used to remunerate individual account balance transfers and withdrawals. The AFP receiving the balance transfer charges this commission.
  • PERU: may be used to remunerate administration of voluntary contributions, when they are withdrawn.
  • URUGUAY: may be used to remunerate registration of mandatory contributions and voluntary or agreed contributions.

Contributions, Mandatory:

Amount periodically deposited in the worker’s Individual Account, by virtue of a legal mandate, which is paid by the worker and/or the employer.

  • MEXICO: the Federal Government also contributes to the worker’s Individual Account.

Contributions, Voluntary:

Additional voluntary contributions made by dependent and independent workers, with the purpose of increasing their pension or anticipating their retirement age. They are deposited into the individual capitalization account.

  • CHILE: they receive tax benefits.
  • DOMINICAN REPUBLIC: they are known as “Aporte Voluntario Extraordinario (Extraordinary Voluntary Contribution)”.

Contributor:

A member who actually contributes every month for the earnings accrued the previous month, excluding those receiving pensions from the system who continue to contribute.

  • ARGENTINA: known as Aportante
  • BOLIVIA: members with accredited collection since the start-up date
  • COLOMBIA: members who have made at least one contribution in the past 6 months
  • MEXICO: known as Aportante.

I

Individual Capitalization Account:

Savings account exclusively owned by each affiliate, where his or her contributions are registered, as well as voluntary contributions, agreed deposits and every income or disbursement, in addition to the returns generated by them.

  • MEXICO: the individual account has the following subsidiary accounts: Retirement, Old Age Unemployment and Old Age; Housing; and Voluntary Contributions.

L

Life Annuity:

A pension mode purchased by a member from the Life Insurance Company of his/her choice when he/she retires, obliging the company to pay a monthly income from the time the contract is signed until the member dies, and to pay survivorship pensions to his/her beneficiaries.

  • BOLIVIA: known as a Lifetime Insurance
  • PERU: a difference is made between a Family Life Annuity (corresponding to the definition above) and Personal Life Annuity, a mode in which the member signs a contract with an AFP for the payment of a monthly income until he/she dies. To that end, the AFP must establish a system of self-insurance, by using the balances in the Individual Capitalization Account of members who signed such a contract and have died.

M

Member:

Every worker who is included in the individual capitalization system of social security, having signed a contract with a pension fund administrator. He/she is entitled to the risk coverage provided by the system.

P

Pension Fund Administrator:

A public limited company with a single corporate purpose, charged with managing pension funds and granting and administering the services and benefits described in the law.

  • ARGENTINA: known as Administradora de Fondos de Jubilaciones y Pensiones
  • COLOMBIA: known as Sociedad Administradora de Fondos de Pensiones y Cesantía
  • COSTA RICA: known as Operadora de Pensiones
  • EL SALVADOR: known as Institución Administradora de Fondos de Pensiones
  • MEXICO: known as Administradora de Fondos para el Retiro
  • PERU: known as Administradora Privada de Fondos de Pensiones
  • URUGUAY: known as Administradora de Fondos de Ahorro Previsional.

Pension Fund:

A fund made up of the mandatory and voluntary contributions paid by members and the yield of the investments, once commissions and benefit payments have been deducted. This fund has a net worth which is separate from that of the Administrator.

  • ARGENTINA: known as Fondo de Jubliaciones y Pensiones
  • COSTA RICA: known as Fondo de Pensiones Complementarias.

Programmed Withdrawal:

A pension mode which the member agrees with a Pension Fund Administrator, where the pension is charged against the balance that he/she holds in his/her individual capitalization account, as a result of withdrawing annually the amount expressed in units of constant value, which results from dividing the actual balance in his/her individual capitalization account each year by the capital needed to pay one pension unit to the member, and to his/her beneficiaries following his/her death.

  • COSTA RICA: known as Permanent Income
  • CHILE: the amount of the pension is expressed in U.F. (Unidades de Fomento)
  • EL SALVADOR: known as Programmed Income.

R

Recognition Bond:

An instrument expressed in money, issued by the social security institutions of the old system, representing the periods of contributions recorded in those institutions by contributors who join the system of individual capitalization. They represent payments designed to contribute towards the formation of the capital needed to finance pensions.

  • COLOMBIA: it is known as a Pension Bond.

S

Superintendency of Pension Fund Administrators:

An autonomous state body with its own legal standing and net worth which, in representation of the State, exercises the function of ensuring compliance with the Law and its complementary regulations in the area of social security.

T

Taxable Wage:

The amount of money (income) that the independent member declares monthly to the Administrator to which he/she belongs, and which serves as the basis for calculating contributions. It cannot be less than one minimum wage, nor more than the equivalent of sixty U. F.

  • BOLIVIA: known as Contribution Income. It cannot be less than one national minimum wage nor more than the equivalent of sixty times the national minimum wage.
  • COLOMBIA: known as Basic Contribution Income: It cannot be less than one currently legal minimum monthly wage, or more than twenty-five currently legal minimum monthly wages.
  • PERU: known as Insurable Earnings.
  • DOMINICAN REPUBLIC: known as Contribution Wage. It cannot be less than one legal minimum wage corresponding to the sector where the member works, or more than the equivalent of twenty national minimum wages.

Transfer:

Change of an Individual Account Balance from one Pension Fund Administrator to another, based on the affiliate’s decision and by virtue of an agreement subscribed between the affiliate and the new AFP. In general, it may be carried out by affiliates and pensioners with Scheduled Withdrawals. Most countries establish formalities and some restrictions on transfers.

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