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Importance
Chilean Case
Proposals
Pension System Coverage:
Evaluation and Evidence for Chile
Guillermo LarraínSuperintendent of Pension Funds
President of AIOS
October, 2003
Importance
Chilean Case
Proposals
Analyzing Coverage
Coverage can be analyzed from two different perspectives:
Proposals
Importance Number of affiliates: these are the workers that have contributed, at least once, at some point during their lives.
Number of contributions that an affiliate makes during his/her life.
Workers Covered
Amount of Benefits
Importance
Chilean Case
Proposals
Coverage is importantWorkers Covered: People excluded would not be entitled to benefits during their old age. They would need their own savings or family support during retirement. In case of poverty they would need assistance from the government.Amount of Benefits: The benefit’s amount depends significantly on the number of
contributions:
Effect of periods without contributions over the pension benefit
0%
-25%
-39%
-58%-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
full density 10 years at the end 10 years at themiddle
10 years at thebeginning
Importance
Importance
Chilean Case
Proposals
Chile: top in L.A. ranking (10 years of 50-60% Coverage)
Contributors/ActiveLabor Force 2002 (source: AIOS)
0%
10%
20%
30%
40%
50%
60%
Argentina Bolivia Chile ElSalvador
México Perú UruguayChilean Case
Monthly Contributors (1984-2003)
20%
40%
60%
80%
100%
contributors / labor force
contributors / affiliates
Importance
Chilean Case
Proposals
Contributors/affiliates has decrease and Females continue 10% under Males
Differences by Gender
56%
47%44%37%
0%
10%
20%
30%
40%
50%
60%
1992 2002Year
Male
Female
Independents workers: extremely
low coverage
Dependent v/s independents coverage (2002)
4,7%
70%
0%20%40%60%80%
Independents Dependents
Chilean Case
Importance
Chilean Case
Proposals
Younger independent
workers, even less coverage
Distribution of Independent Contributors & Labor Force
0%
5%
10%
15%
20%
-20 20-25
25-30
30-35
35-40
40-45
45-50
50-55
55-60
60-65
65-70
70+
IndependentContributors
IndependentLabor Force
Chilean Case
Distribution of Dependent Contributors and Labor Force
0%
5%
10%
15%
20%
-20 20-25
25-30
30-35
35-40
40-45
45-50
50-55
55-60
60-65
65-70
70+
Dependent contributors
Dependent labor force
Importance
Chilean Case
Proposals
Younger people have lower voluntary savings
Voluntary savings distribution by age and type
0%
5%
10%
15%
20%
25%
AFP Mutual Funds Insurance Comp.
-20 20/25 25/30 30/35 35/40 40/45
45/50 50/55 55/60 60/65 65/70 70
Chilean Case
Importance
Chilean Case
Proposals
Coverage CASEN (2000) by Education
37%43%
53% 55%
70%75%
83%
20%
40%
60%
80%
2000
no educationincomplete primarycomplete primaryincomplete secundarycomlpete secundaryincomplete superiorcomplete superior
More Education, more coverage
(Casen survey 2000)
Coverage CASEN (2000) by zone
65%
43%
20%
40%
60%
80% urban
ruralMore urban, more coverage (Casen
survey 2000)
Chilean Case
Importance
Chilean Case
Proposals
There is a very low
knowledge about the system
(SAFP Survey 2002)
¿Do you now the amount you contribute monthly to your pension funds (AFPs)?
53% 47%
0%20%40%60%
Yes No
¿Do you now the price (comission) you pay to your funds administrators (AFPs)?
3%
97%
0%50%
100%
Yes No
¿Do you now the amount of your personal fund?
44%56%
0%
20%
40%
60%
Yes No
Chilean Case
Importance
Chilean Case
Proposals
Independents Workers
Tax incentives. Simplify contribution’s payment. Short run benefits to create incentives:
Health program Unemployment insurance
Correlate payments with income profile Establish a mandatory contribution for independent workers
Low Income Workers Create incentives for low income workers to go formal
Establish a lower rate of mandatory contributions for this group
Keep familiar benefits even when the wife is a dependent worker
Establish gradual minimum pension benefits
Proposals
Importance
Chilean Case
Proposals
WomenWomen in general face several difficulties, among which we have: early legal retirement, lower salaries, live longer, frequent periods of no contributions because of maternity.
Some ideas include:Include work-at-home women into the system through additional husband's contribution or other mechanism (maybe with incentives) Increase legal retirement age (from 60 to 65)Subsidy from men to womenFlexibility of labor market considering women’s needsProposals
Importance
Chilean Case
Proposals
Other Proposals
Better education about the benefits of the system.
Greater involvement with the system Example: voluntary retirement saving,
multiple funds.Proposals