4 Life asked CMF to re-evaluate the new annuity modality

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The company 4 Life Seguros de Vida sent two letters to the Financial Market Commission (CMF) this year, on April 19 and May 17, in which it asked the regulator to “seriously re-examine” the immediate annuities with a temporary increase in pension clause. , better known as “stepped annuity”.

The CMF responded to the insurer owned by the Del Río family on September 14, where it revealed that, in particular, 4 Life Seguros de Vida conducted an “analysis of the evolution of the contracting of immediate annuity policies with a clause of temporary pension increases, for the periods of October to December 2022 and January to March 2023, suggesting that this Commission “seriously re-evaluate this retirement option.”

4 Life Asked Cmf To Re-Evaluate The New Annuity Modality
4 Life Asked Cmf To Re-Evaluate The New Annuity Modality

In the document, the CMF points out that, in summary, the insurer says that “the cost of a higher pension at the beginning should mean that its value will be reduced later, which may happen as a result of ‘the contracting party with a bad. assimilates an explanation, or I act with a short-sightedness.” For this reason, 4 Life proposed “to prepare a document and create a new example that proves the convenience of this option,” the CMF document details. The insurer also argues that “our concern lies in the fact that the product seems to contradict the concept of resources for old age.”

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The CMF responded to the company that “it must be remembered that the pension of these characteristics has a similar effect to the Temporary Income with Deferred Life Annuity set in DL No. 3,500. Exempt Resolution No. 6,270 of November 4, 2021, approving the additional clause in question, considering that it provides members who intend to retire in the immediate life annuity (RVI) modality or its modification, an alternative to programmed retirement ( RP). ) and deferred annuity (DVR) and, an alternative for those elderly and disabled pensioners who prefer to get a larger pension during the first years of their retirement, with the advantage that it is always UF within in that period of time.”

Then, the CMF added: “Today, this Commission recognizes the importance of pensioners who know and are fully aware of the implications of the pension they choose, to avoid situations like those described in its presentation. Therefore, this Commission will take into account what has been reported by that company and evaluate alternatives for improvements to the current regulations.

The regulator also said that “without prejudice to what has been stated, the information provided to you and other additional information that may be collected may be considered for the evaluation of this regulation. In any case, it must be remember that companies are not obliged to offer this type of life annuity, and it is up to the companies to adequately communicate the characteristics of the product to their future pensioners, so that they fully understand this type. pension.”

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Finally, the CMF added that “when analyzing the participation of different pension modalities of old age and disability pensioners, which are the people who can contract this additional clause, it was observed that the Deferred Life Annuity , a type of life annuity that. “Chosen for many years by renters, it was replaced by the RVI with a temporary increase in the pension clause.”

The graduated annuity has been gaining ground among new pensioners since it was launched on September 5 last year. In fact, according to the Association of Insurers, the annuity with a temporary pension increase clause represents more than half of the new pensions they provide.

“From September 2022 to December, almost 55% of life annuities are observed to have a clause with a temporary pension increase in the total annuities marketed during the same period,” the union detailed at the start of year. Along these lines, they explained that in fact it began to represent 30% in September, but in December it concentrated around 70% of new sales of annuities.

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This new alternative allows to obtain a larger pension during the first years of retirement, always and in the UF, and then descend to the lifetime pension chosen by the pensioner. There you can choose to increase the pension in the first years, up to double, but it will be reduced. In any case, the pension may not be less than UF 3.

The new clause can be contracted voluntarily for old age or disability pensions and acts as additional coverage within the immediate annuity and immediate annuity pension modalities with programmed withdrawal.

In the immediate annuity modality, the pensioner receives the payment of a monthly income from a life insurance company, set by the UF, which in case of death, will be given to his pension beneficiaries.

Meanwhile, in the immediate annuity with programmed withdrawal, the funds available to the member in his individual AFP account are divided and an immediate annuity and a pension with programmed withdrawal are contracted simultaneously.

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