Longevidad y Pensiones: una Propuesta de Seguro para la Cuarta Edad

Guillermo Larrain, Simon Ballesteros and Sebastián Garci

Working Papers from University of Chile, Department of Economics

Abstract: one of the principal shortcomings of the Chilean pension system is the low level of pensions. In this article, we present a proposal to reformulate the system that divides the retirement period in two periods, the third and fourth age. The entry door towards the fourth age is endogenous on life expectancy. We argue each period should be financed con different instruments: savings first and insurance later. Unlike most pension systems in which the savings and insurance logic overlap, in the proposed system they appear sequentially. The saving pillars maintain the same current structure with the difference that the depletion phase lasts only until the person reaches its retirement age’s life expectancy. Afterwards, longevity insurance will finance pensions. Affiliated persons receive a pension financed with a premium on the labor income of active workers. This system not only has the potential to increase pensions directly – due to the higher contribution rate (contribution plus the premium) and smaller time of coverage - but also has the potential to better manage longevity risk that increasingly affects all of social security schemes. We analyze three institutional alternatives to provide this insurance: pure pay-as-you-go system, a segregated fund and an insurance company. This last option appears to be the most suitable. This proposal allows in the short term increasing current pensions and the future pensioners on average of 24% with an additional contribution or premium estimated between a 2% and 4% depending on the institutional structure. Finally, we analyze the possible distributive effects and discuss alternatives to face them.

Pages: 66 pages
Date: 2017-03
New Economics Papers: this item is included in nep-age
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.econ.uchile.cl/uploads/publicacion/c6fb ... 9e44491a4ed83dd1.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:udc:wpaper:wp441

Access Statistics for this paper

More papers in Working Papers from University of Chile, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mohit Karnani (mkarnani@fen.uchile.cl).