Importance Chilean Case Proposals Pension System Coverage: Evaluation and Evidence for Chile Guillermo Larraín Superintendent 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 important Workers 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: Importance

Chilean Case Proposals Coverage in Chile Chilean Case

Importance Chilean Case Proposals Chile: top in L.A. ranking (10 years of 50-60% Coverage) Chilean Case

Importance Chilean Case Proposals Contributors/affiliates has decrease and Females continue 10% under Males Independents workers: extremely low coverage Chilean Case

Importance Chilean Case Proposals Younger independent workers, even less coverage Chilean Case

Importance Chilean Case Proposals Younger people have lower voluntary savings Chilean Case

Importance Chilean Case Proposals More Education, more coverage (Casen survey 2000) More urban, more coverage (Casen survey 2000) Chilean Case

Importance Chilean Case Proposals There is a very low knowledge about the system (SAFP Survey 2002) Chilean Case

Importance Chilean Case Proposals Some ideas to deal with Coverage Proposals

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 Women Women 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 women  Flexibility of labor market considering women’s needs Proposals

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

Importance Chilean Case Proposals Pension System Coverage: Evaluation and Evidence for Chile Guillermo Larraín Superintendent of Pension Funds October, 2003