Chile - Financial Sector Assessment Program, November 2021 : Pension System
The pension system in Chile is known for the 1980 establishment of a defined contribution, individual account system managed by private pension funds (AFPs). In 2008 a major reform of the system took place to address issues of low coverage and low...
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| Language: | English |
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World Bank, Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099455207152241762/P172020034616d00409bb10dac389ad9d3b http://hdl.handle.net/10986/37751 |
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okr-10986-377512022-07-26T05:10:39Z Chile - Financial Sector Assessment Program, November 2021 : Pension System Cohen, Charles Dijkman, Miquel PENSION REFORM DEFINED CONTRIBUTION PENSION SOCIAL UNREST PENSION REFORM DEMONSTRATION PRIVATE MANAGEMENT OF PUBLIC PENSION PRIVATE PENSION FUNDS PERFORMANCE COVID EMERGENCY PENSION WITHDRAWL EMPLOYER PENSION CONTRIBUTION FINANCIAL SECTOR DIVERSIFICATION The pension system in Chile is known for the 1980 establishment of a defined contribution, individual account system managed by private pension funds (AFPs). In 2008 a major reform of the system took place to address issues of low coverage and low pension rates. In 2019 the Solidarity Pension rate was raised to the poverty rate following severe social unrest which included protests against the pension system, whilst in 2020-2021 large emergency withdrawals have been allowed from the funds in the context of the Coronavirus (COVID-19) pandemic. The funded pension system has made a significant contribution to financial sector diversification and stability, while promoting sustained economic growth and development, and should be maintained. Further withdrawals should be avoided, and the contribution rate increased. An employer contribution of at least the proposed 6 percent is needed to improve pension levels and could be managed by a public entity with strong governance in a way which complements the AFP system. A non-profit AFP could be established to compete with and act as a standard setter for the private funds managing the existing 10 percent employee contributions. To contribute to long-term investment and financial stability, the multifondos investment regulation should be replaced with a ‘target date’ default, delineated by retirement age, along with a limited number of investment options, with switching contained and some access to funds for specific purposes strictly controlled. The risk-based supervision model of the SP should be recalibrated to further transition from a compliance approach. 2022-07-25T13:38:20Z 2022-07-25T13:38:20Z 2021-11 Report http://documents.worldbank.org/curated/en/099455207152241762/P172020034616d00409bb10dac389ad9d3b http://hdl.handle.net/10986/37751 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work :: Financial Sector Assessment Program (FSAP) Latin America & Caribbean Chile |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
PENSION REFORM DEFINED CONTRIBUTION PENSION SOCIAL UNREST PENSION REFORM DEMONSTRATION PRIVATE MANAGEMENT OF PUBLIC PENSION PRIVATE PENSION FUNDS PERFORMANCE COVID EMERGENCY PENSION WITHDRAWL EMPLOYER PENSION CONTRIBUTION FINANCIAL SECTOR DIVERSIFICATION |
| spellingShingle |
PENSION REFORM DEFINED CONTRIBUTION PENSION SOCIAL UNREST PENSION REFORM DEMONSTRATION PRIVATE MANAGEMENT OF PUBLIC PENSION PRIVATE PENSION FUNDS PERFORMANCE COVID EMERGENCY PENSION WITHDRAWL EMPLOYER PENSION CONTRIBUTION FINANCIAL SECTOR DIVERSIFICATION Cohen, Charles Dijkman, Miquel Chile - Financial Sector Assessment Program, November 2021 : Pension System |
| geographic_facet |
Latin America & Caribbean Chile |
| description |
The pension system in Chile is known
for the 1980 establishment of a defined contribution,
individual account system managed by private pension funds
(AFPs). In 2008 a major reform of the system took place to
address issues of low coverage and low pension rates. In
2019 the Solidarity Pension rate was raised to the poverty
rate following severe social unrest which included protests
against the pension system, whilst in 2020-2021 large
emergency withdrawals have been allowed from the funds in
the context of the Coronavirus (COVID-19) pandemic. The
funded pension system has made a significant contribution to
financial sector diversification and stability, while
promoting sustained economic growth and development, and
should be maintained. Further withdrawals should be avoided,
and the contribution rate increased. An employer
contribution of at least the proposed 6 percent is needed to
improve pension levels and could be managed by a public
entity with strong governance in a way which complements the
AFP system. A non-profit AFP could be established to compete
with and act as a standard setter for the private funds
managing the existing 10 percent employee contributions. To
contribute to long-term investment and financial stability,
the multifondos investment regulation should be replaced
with a ‘target date’ default, delineated by retirement age,
along with a limited number of investment options, with
switching contained and some access to funds for specific
purposes strictly controlled. The risk-based supervision
model of the SP should be recalibrated to further transition
from a compliance approach. |
| format |
Report |
| author |
Cohen, Charles Dijkman, Miquel |
| author_facet |
Cohen, Charles Dijkman, Miquel |
| author_sort |
Cohen, Charles |
| title |
Chile - Financial Sector Assessment Program, November 2021 : Pension System |
| title_short |
Chile - Financial Sector Assessment Program, November 2021 : Pension System |
| title_full |
Chile - Financial Sector Assessment Program, November 2021 : Pension System |
| title_fullStr |
Chile - Financial Sector Assessment Program, November 2021 : Pension System |
| title_full_unstemmed |
Chile - Financial Sector Assessment Program, November 2021 : Pension System |
| title_sort |
chile - financial sector assessment program, november 2021 : pension system |
| publisher |
World Bank, Washington, DC |
| publishDate |
2022 |
| url |
http://documents.worldbank.org/curated/en/099455207152241762/P172020034616d00409bb10dac389ad9d3b http://hdl.handle.net/10986/37751 |
| _version_ |
1764487837765337088 |