Posts Tagged ‘Chile’

private pensions in Chile and Peru

Monday, August 22nd, 2016

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.

Chile’s mandated contributions to private pension funds

Monday, January 13th, 2014

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.

pension coverage in Latin America

Tuesday, October 22nd, 2013

This chart is interesting. Bolivia stands out as the only country of the ten that has a universal pension in place.

The black bars refer to the percentage of the labor force that contributes to a social security scheme. Many contributors will never receive a pension because they move in and out of formal employment, so do not contribute long enough to qualify for a pension. The red bars refer to the percentage of the retirement-age population that receives any sort of pension (contributory or noncontributory).

The authors of the article observe “Recently, the Mexican president introduced a pension reform bill to Congress that would set up a universal noncontributory old-age benefit.” – without cautioning that the proposed pension, despite its name, is not universal.

pension coverage

Source: US Social Security Administration, “Social Pensions and Subsidized Benefits in Latin America“, International Update (September 2013).

Latin American pension reform (update)

Friday, September 27th, 2013

Introducing individual accounts (funded old-age savings) in Latin American pension systems did not accomplish one of its major goals

more videos on universal pensions

Friday, September 7th, 2012

HelpAge International has posted four more video clips from the testimony of myself and Michael Littlewood last November to a committee of the Legislative Council in Hong Kong. This brings the total number of clips to six.

We are very fortunate that the Hong Kong government installed a superb recording system in its new legislative building. You will see that there are few participants in the meeting room itself, but a large number of spectators were watching and listening from above, behind a large glass window.

Michael Littlewood (co-director of the Retirement Policy and Research Centre at the University of Auckland, New Zealand) explains New Zealand’s universal pension scheme, and discusses the role of government in retirement income systems.

Michael Littlewood on New Zealand’s universal social pension (8 minutes)

Larry Willmore and Michael Littlewood answer questions on means-testing in testimony at the Legislative Council of Hong Kong. Larry Willmore talks about stigma and means-testing as tax. Michael Littlewood explains why he’s changed his mind on means-testing and now believes universality is the best approach.

Larry Willmore and Michael Littlewood on means-testing social pensions (9 minutes)

Larry Willmore and Michael Littlewood answer questions on means-testing in testimony at the Legislative Council of Hong Kong. Larry Willmore talks about stigma and means-testing as tax. Michael Littlewood explains why he’s changed his mind on means-testing and now believes universality is the best approach.

Larry Willmore and Michael Littlewood on means-testing social pensions (9 minutes)

Michael Littlewood, at the Legislative Council of Hong Kong, talks briefly about the pension system in Chile before sharing an experience from a recent trip to Bolivia.

Michael Littlewood on the impact of Renta Dignidad in La Paz (1.3 minutes)

Drawing particularly on the experience of Mexico City Larry Willmore talks about how universal pensions can be designed and adjusted to be affordable. Michael Littlewood talks of the importance of community consensus as well as political consensus.

Larry Willmore and Michael Littlewood on the international experience of universal pensions (15 minutes)

The previous two video clips can be accessed here:

Larry Willmore, speaking at the Legislative Council of Hong Kong, explains why contributory pensions are not able to alleviate poverty. Larry also discusses the different types of non-contributory pensions.

Larry Willmore on contributory and non-contributory pensions (10 minutes)

Larry Willmore discusses why Chile’s 1981 pension reform, which attempted to expand coverage by tightening the link between contributions and benefits, was unsuccessful.

Chilean pension reform – Larry Willmore at the Legislative Council of Hong Kong (9 minutes)

Chile’s pension reforms

Wednesday, September 5th, 2012

HelpAge has posted a video of my 10-minute presentation on Chile’s pension reforms. This talk was ad-lib, in response to a question from the audience at Hong Kong’s Legislative Council last November, and does contain one error. The rural pension scheme I mention is for all of Mexico, not just Mexico City. Mexico City (the Federal District) is quite large, and contains districts classified as rural. Those elderly who live in the rural districts of Mexico City are thus entitled to two universal pensions: one from the federal government and another (more generous) pension from the local government.

NB: This clip is fast-streaming. HelpAge will also (I think) be posting my introductory remarks. When that happens, I will replace my previous link with theirs. I will inform TdJ readers of all clips that HelpAge posts from the 2-hour LegCo meeting. It was a lively meeting, and many short segments are of general interest.

HelpAge, “Chilean pension reform – Larry Willmore at the Legislative Council of Hong Kong“, Pension Watch, 5 September 2012.

Pinochet’s Chile: model for US pension reform?

Tuesday, October 18th, 2011

Herman Cain, the former pizza executive surging in polls for the Republican presidential nomination, wants to replace Social Security with what he called the

universal pensions vs universal minimum pensions

Friday, October 7th, 2011

Notes for a keynote address that I will deliver on November 27th to the Symposium “International Experiences on Universal Pensions” at the Polytechnic University of Hong Kong. The event is sponsored by Alliance for Universal Pensions (Hong Kong), an umbrella political action group.

Universal pensions and universal minimum pensions

pension reform in Chile

Wednesday, August 31st, 2011

[Salvador Vald

Chile’s new President

Tuesday, January 19th, 2010

Wealthy businessman Sebasti