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Annuity markets and benefit design in multi-pillar pension schemes : experience and lessons from four Latin American countries

Author

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  • Palacios, Robert
  • Rofman, Rafael

Abstract

A growing number of countries have introduced mandatory defined contribution schemes. As these schemes mature, their success will increasingly depend on how well they translate accumulated funds into a stream of retirement income. Successful reforms will rely on a well regulated, and competitive insurance sector. They will strike a balance between individual preferences, and public policy objectives, such as providing a reasonable amount of longevity insurance. This paper describes the benefit stage in four Latin American countries, and presents preliminary evidence on their emerging annuities markets. We find that these markets are less transparent than they should be, and that supervision is less strict than during the accumulation period. Annuities markets will grow dramatically in the coming decades as the reforms mature. Growth depends on policy variables, such as the use of recognition bonds, as well as initial conditions. The markets in Peru and Colombia, will be much smaller than those in Chile and Argentina, in both absolute, and relative terms. The immaturity of the schemes, and temporarily limited flow of new pensioners, should be viewed as a window of opportunity for improving supervision, increasing transparency, and educating workers.

Suggested Citation

  • Palacios, Robert & Rofman, Rafael, 2001. "Annuity markets and benefit design in multi-pillar pension schemes : experience and lessons from four Latin American countries," Social Protection and Labor Policy and Technical Notes 23159, The World Bank.
  • Handle: RePEc:wbk:hdnspu:23159
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    References listed on IDEAS

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    1. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 2009. "The Effects Of Financial Education In The Workplace: Evidence From A Survey Of Employers," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 605-624, October.
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    Cited by:

    1. Olivia S. Mitchell & David McCarthy, 2002. "Annuities for an Ageing World," CeRP Working Papers 21, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    2. Impavido, Gregorio & Thorburn, Craig & Wadsworth, Mike, 2004. "A conceptual framework for retirement products : Risk sharing arrangements between providers and retirees," Policy Research Working Paper Series 3208, The World Bank.
    3. repec:dau:papers:123456789/6253 is not listed on IDEAS
    4. Acuna R., Rodrigo & Iglesias P., Augusto, 2001. "Chile's pension reform after twenty years," Social Protection and Labor Policy and Technical Notes 24079, The World Bank.
    5. World Bank, 2016. "Income Support for Persons with Disabilities in Middle East and North Africa," World Bank Other Operational Studies 25179, The World Bank.
    6. Rofman, Rafael, 2000. "The pension system in Argentina - six years after the reform," Social Protection and Labor Policy and Technical Notes 23089, The World Bank.

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