Assessing Chile's Pension System: Challenges and Reform Options

Samuel Pienknagura and Christopher Evans

No 2021/232, IMF Working Papers from International Monetary Fund

Abstract: Chile’s pension system came under close scrutiny in recent years. This paper takes stock of the adequacy of the system and highlights its challenges. Chile’s defined contribution system was quite influential when introduced, and was taken as an example by other countries. However, it is now delivering low replacement rates relative to OECD peers, as its parameters did not adapt over time to changing demographics and global returns, while informality persists in the labor market. In the absence of reforms, the system’s inability to deliver adequate outcomes for a large share of participants will continue to magnify, as demographic trends and low global interest rates will continue to reduce replacement rates. In addition, recent legislation allowing for pension savings withdrawals to counter the effects from the COVID-19 pandemic, is projected to further reduce replacement rates and increase fiscal costs. A substantial improvement in replacement rates is feasible, via a reform that raises contribution rates and the retirement age, coupled with policies that increases workers’ contribution density.

Keywords: replacement rate; savings withdrawal; contribution rate; reform option; fiscal cost; Pension spending; Pensions; Retirement; Aging; Women; Global (search for similar items in EconPapers)
Pages: 52
Date: 2021-09-10
New Economics Papers: this item is included in nep-age
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Working Paper: Assessing Chile’s pension system: challenges and reform options (2024)
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