It looks like the beginning of the end for Chile’s system of private pensions based on forced retirement savings. The Chilean model has been promoted by the World Bank in an effort to move contributory pensions away from public, pay-as-you-go schemes to privately-managed, pre-funded schemes.
Developing countries around the world have implemented versions of the Chilean model, but there are increasing complaints of high administrative charges and poor returns for participants. The model seems to have lost its appeal even in the World Bank, which now places more emphasis on non-contributory pensions, referred to as a ‘zero pillar’.
Hundreds of thousands of people across Chile have taken part in protests against the country’s controversial privatised pension plan. The scheme was launched in 1981, during the military government of General Augusto Pinochet. ….
President Bachelet, who is left wing, … proposed an increase in employer’s contributions and a reduction in commissions paid to the fund managers. But protesters want the Pension Fund Administrators (or AFP) scheme to be scrapped altogether.
Leaders of the No More AFP movement have called a nationwide strike on 4 November.
“Chileans protest against Pinochet-era private pension scheme“, BBC News, 22 August 2016.
Peru is one of the many countries that would like to reform the Chilean model of pensions that they implemented long ago. By coincidence, I received today in my inbox a Declaration of The International Federation of Pension Fund Administrators (FIAP), offering technical assistance to the Government of Peru in improving its system.
FIAP is based in Santiago, Chile. Its members are companies that administer the forced retirement savings deposited with them. Members are from numerous countries of Latin America, in addition to Spain, Kazakhstan and Ukraine.
The Declaration is brief and very self-serving.
Tags: Chile