The Private Pension System Supervision Commission (CSSPP) yesterday set out the rules concerning mandatory private pensions (pillar II), which are scheduled for launch on September 17th. The rules are incorporated into the initial joining regulation, which stipulates the procedures the approximately 2.5 million employees, will have to follow to join a privately managed pension fund.
Each employee up to 35 years of age, which includes those who turn 35 until the end of this year, is required to join the system. The option is also open to those aged between 35 and 45. While the former only have four months (from September 17th, 2007 - January 17th, 2008) to decide on a privately managed fund to join, those aged up to 45 may join at any point over the next few years, on condition that they are not older than 45.
Joining a mandatory private pension fund is an individual choice, which may not be delegated, the regulation published by CSSPP reveals. Each employee will join the system by signing a "framework joining contract", which is the same for all the funds and is approved by the Commission and includes the company logo and general data concerning each pension fund manager.
Besides the signing of the paper, the marketing agent that facilitates the completion of this contract will request each client to provide a copy of their ID, along with a signature. This will significantly reduce the number of cases of attempted fraud believe CSSPP representatives. Two copies will be signed for each contract, with both the client and the agent retaining a copy.
Every mandatory private pension manager will keep an electronic register of the contributors (clients) attracted to the fund, which it will send to the National Pension and Social Security Office (CNPAS) bimonthly. This system will function as a registrar by validating each participant along the way. Besides the electronic registry updated and sent twice a month, the managers will be required to submit to the CNPAS scanned copies of all the joining papers and of the ID papers signed by participants.
At the end of the four-month period, the CNPAS will perform a final validation of the participants to the system. For employees aged under 35 who have failed to make an option by the deadline or individuals who have signed several joining papers will be considered as "no option made" and will be subject to the reassignment process, called a "lottery".
The lottery will distribute these employees among the existing mandatory private pension funds on the market; both randomly and proportionately with the market share attained by each fund.
Employees who are assigned to a mandatory private pension fund through the lottery system will be notified by the managers of the respective funds as to which fund they have been assigned to within 15 days.
The initial joining regulation adopted by the Commission also includes the standard version of the framework joining contract and is available in the legislative section on the CSSPP website.
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