Orazio Attanasio, Costas Meghir and Olivia S. Mitchell write about their experience on Chile’s Bravo Commission, which examined potential reforms to Chile’s famous (or infamous) personal accounts retirement plan.
Chile’s pension system has been touted as “best practice” by policymakers and researchers around the world. The nation’s funded and regulated private pension funds called Administradoras de Fondos de Pensiones (AFPs) and financed by workers’ mandatory 10% contributions, has now accumulated over $160 billion in privately-managed accounts. AFPs cover about 10 million affiliates, and provide retirement benefits to more than a million retirees.
Chile’s system, however, is not perfect. Many workers retire with no or very low pensions, mostly because their participation into the formal labor market had been occasional and their contributions low.
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