Chile’s mandated contributions to private pension funds

Chile’s privatised pension system is missing more than US$2.2 billion of mandated contributions, according to the first annual report on unpaid pension contributions issued by the Chilean pension regulator Superintendencia de Pensions (SP). This is money that employers deducted from wages of workers, but failed to pass on to private pension funds.

Of the 9.27mn clients in the system at end-December, approximately 1.83mn, or 20% of the total, had at least one contribution unpaid by their employer. Some 224,046 employers are tied to late payments, with average debt per employer amounting to around $4.79mn pesos [9,000 US dollars], said SP. ….

At end-2012, there were 799,997 court proceedings underway to recover 841bn pesos, or 78% of the unpaid contributions. Of those, 32% are proceeding normally and 38% find the employer to be unreachable, while in 8% of these cases the employer has gone through or is going through bankruptcy proceedings. The remaining 22% are at the prejudicial debt collection stage.

Of current unpaid contributions, 2.8% have been outstanding for more than 20 years, while 57.8% have been outstanding for between 10 and 20 years.

Kieran Lonergan, “Chile’s outstanding AFP contributions exceed US$2.2bn“, BNamericas, 7 January 2014.

Chile’s system of mandated contributions (10% of salaries) to individual retirement accounts is generating considerable employment for lawyers. Thanks to Michael Littlewood for the pointer.


Comments are closed.