The Pros and Cons in Chilean Pension System

The pros

1 the system is not rely on the demographic trends

it doesn't matter how many people will be in the system you will get you pay due to the fact that is no bases on Ponzi pyramid

2 their salary could generate more money

Workers can have different investments to choose, there are five types of funds which could generate more money from their salary.

3 people only responsible of their retirement fund

4 the system has less social burden for the government

Because the system is run/managed private sector, their government don’t have to take amount of money for the dole, and they can just focus on how to maintain their GDP and improve their economic growth.

5 their wages are higher

Compare to the Spanish pension system, workers in Spain have to contribute 21% of their salary including the dole& health insurance& retirement payment, workers in Chile only have to contribute 10% of their salary for their retirement payment and 3% for the disabilities. So the balance of their salary is much higher.

The cons

1 funds must be highly regulated

2 more types of funds to invest give them more risk

It is easy to know that if they invest in higher rate of return, and the degree/level of risk is much higher, some low wages workers would choose high return funds to generate more money back but they don’t take into consideration for the risk.

3 dole and health insurance are not mandatory.

Compare with the Spanish system which includes dole and health insurance, it is not good for the unemployed people.

4 high administrative cost

The administrative fees are high due the high profit of the investments and because fund manager have to invest in new information technology and marketing tools.

5 Low coverage rates

A large portion of the labor force has not been covered and workers in the system include those who do not make contribution because they spend much time out of formal labor force including informal sector or unemployed, only a small portion of...