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What are the types of savings in pension funds and how their profitability works

At the beginning of working life, workers choose an investment alternative so that their pension savings are managed according to their objectives, with the stage of life in which they are and the risk profile. This is called Mandatory Pension Multi funds.

Here in we tell you those are the 3 options that can be chosen:

1. Riskier fund: is the one that invests in assets with great growth potential. In this way, higher returns are associated with greater risks, due to market volatilities, however, taking into account the long-term horizon, variations can be corrected over time and favor the growth of customers’ pension savings.

2. Moderate fund: Investments have a balanced exposure to risk and clients who still lack time to reach their retirement stage are recommended, usually people over 45 years of age.

3. Conservative fund: this is recommended for those people who are close to their retirement stage, with low risk tolerance and whose priority is to maintain all their accumulated capital. This favors the stability of resources with lower profitability and low volatility in the assets invested.

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“It is important to remember that the Mandatory Higher Risk Pension Fund is the recommended investment alternative for young people and for those who are in their productive stage. This option offers better returns and allows recoveries against possible variations in the financial markets, “explains Andrés Herrera, investment portfolio manager at Colfondos.

We must take into account the importance of starting to make pension contributions early, periodically and persistently over time, so that each person can potentiate their pension savings for the time of their retirement.

What is profitability?

Profitability is the benefit obtained from an initial investment of money made in the medium and long term, which is generated thanks to the administration of resources by a team of experts who are responsible for managing investment portfolios. A person who starts his contributions to compulsory pension and constantly from his 25 years, when he reaches the time of his pension, approximately 70% of his final pension balance will be the product of the profitability generated over time.

According to the Ministry of Labor in Colombia there are figures of 2,300,000 pensioners.

How many Colombians have the savings habit and between what ages are they?

Fincomercio, the savings and credit cooperative, did a study to find out how disciplined Colombians are when it comes to saving. One of the main findings of this x-ray is that it established the average daily savings of a Colombian who earns a minimum wage. The figure is $1,000 pesos, which they mostly save in coins, reaching a total of $30,000 pesos per month.

When consulting men and women who earn the minimum wage, they showed what is the number 1 reason to save, the survey reveals two main reasons, to achieve the initial payment for the purchase of a home and to have a reserve to solve unforeseen events.

A detailed review of the figures allows us to see differences in the savings percentages when comparing men and women. In the case of the female gender, those who save the most, with 52%, are those over 55 years old, followed with 26% by the group between 35 and 54 years old, then with 15% those between 18 and 34 years old and, finally, 7% for those from 0 to 17.

As for men, the percentages reveal that, in the group over 55 years of age, they outnumber women, since the percentage rises to 43%. In the segment of 35 to 54 years old, 28% of them save, while in the range of 18 to 34 years old only 18% do so, and finally with 11% those who are between 0 to 17 years old.

In households of strata 1, 2 and 3, Colombians resort to CDATs with an opening average of $300,000 pesos per month.

The 4 cities with the highest level of savings are Bogotá, Cali, Medellín and Barranquilla in all strata, from 1 to 6.

“The results of this x-ray on savings reiterate the importance of something we have been working on and that is to have products and services connected to the real budget of Colombians and to be absolutely flexible in the starting amounts so that we can really help the largest number of people, for this reason, our savings accounts for adults and children are opened with only $30,000 pesos per month and the investment products that are highly desired by pensioners and independent workers, such as CDAT’S, are available from $300,000 pesos,” he explains. Gloria Gutiérrez, Commercial Deputy Manager of Fincomercio.

The two segments that save the most are the employees to solve unforeseen family problems and the self-employed, to grow their businesses.

Finally, the Fincomercio experts reveal the arguments offered by those who still do not save. The main ones are:

1. “I have low income and cannot save”

2. “I think that to save I must have a large amount of money”

3. “Since I don’t have money left over, I can’t save”

4. “Saving requires a lot of sacrifice and effort”

5. “Why save if I don’t have clear goals”