The ABC of pensions (Part 4)

A central element in any pension program are the investments, which are nothing more than the accumulated contributions of the insured, put into profitable production with the lowest possible risks.

A system that does not invest, in the end will not be able to pay more than what it received. With that money, whose purchasing power has been eaten away by the years and inflation, no pension is possible for anyone. The funds must be invested in order to grow, that is their purpose. This is a truism in any system, whether defined benefit or individually funded.

Thus, the critical elements of any investment regime are, on the one hand, the philosophy and structure of that regime and, on the other hand, the correct and accurate management of the investment portfolio.

The very first philosophical reflection that must be made when designing an investment scheme is that we are talking about a savings system whose main objective is to preserve the policyholder's capital and, from there, to obtain a return that does not compromise that capital. 

This consideration is fundamental because the "social purpose" or "developmentalist vocation" of these funds is often touted, indicating that they should be oriented to programs that, although they have social merit, do not have the characteristics of risk or return to qualify as pension investments.