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Assessing Chile’s pension system: challenges and reform options

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  • Evans, Christopher
  • Pienknagura, Samuel

Abstract

This paper takes stock of Chile’s defined contribution pension system and assesses reform options aimed at increasing replacement rates. An international comparison shows that, despite being quite influential when established, it is now delivering low replacement rates relative to OECD peers, as its parameters did not adapt over time to changing demographics, declining global returns, higher-than-expected informality in the labor market, and, more recently, to legislation allowing for pension savings withdrawals to counter the effects from the COVID-19 pandemic. We find that a reform that raises contribution rates and the retirement age would significantly improve replacement rates and lower fiscal costs associated with the system, especially if accompanied by complementary policies to boost workers’ contribution density.

Suggested Citation

  • Evans, Christopher & Pienknagura, Samuel, 2024. "Assessing Chile’s pension system: challenges and reform options," LSE Research Online Documents on Economics 122536, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:122536
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    File URL: http://eprints.lse.ac.uk/122536/
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    Cited by:

    1. Metodij Hadzi-Vaskov & Mr. Luca A Ricci, 2021. "Understanding Chile’s Social Unrest in an International Perspective," IMF Working Papers 2021/174, International Monetary Fund.

    More about this item

    Keywords

    Chile; fiscal costs; pensions; replacement rates;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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