Experts discuss challenges in the Chilean pension system

Economists Sergio Urzúa, Andras Uthoff and Sebastián Edwards have discussed the scope and challenges of a possible reform to the Chilean pension system in an event organized by AmCham Chile, in which the opening remarks of the meeting were provided by the Undersecretary of Finance, Alejandro Micco. Entitled ‘Where is the Chilean Pension System Heading?’, the event touched on issues including the contribution rate, the importance of avoiding pension gaps and the need to stimulate new savings mechanisms among the general public.

Sergio Urzúa, who has a PhD in economics from the University of Chicago and is Associate Professor at the University of Maryland, stressed that the proposed increase in compulsory contributions must be comprehensively incorporated into AFP accounts. He also highlighted as essential that the benefits of the solidarity pillar, or the increase thereof, must be adequately structured in relation to the disincentives that it may cause in terms of contribution levels. On the other hand, Andras Uthoff, who has a PhD in economics from the University of California, raised the need to incorporate solidarity hand-in-hand with new incentives to encourage contributions by means of a collective savings pillar for people who earn less than CLP$400,000 a month.

The academic from the University of California, Sebastián Edwards, emphasized the need to reconsider certain ideas that have lost traction in the pension debate, including reducing the number of the multifunds from five to three, and whereby one of which should be run according to a lesser level of administration, resulting in lower costs.