The perils of not saving
A pioneering system, now in need of reform
PALLBEARERS bearing coffins scrawled with the legend “No+AFP” joined tens of thousands of Chileans in Santiago on August 21st to protest against the country’s privatised pension system. Organisers—a mix of unions, pensioners’ associations and consumer-advocacy groups—say that a million demonstrated nationwide (perhaps an exaggeration). Pensions are too small, the marchers complain. After “years of abuse…the people have finally woken up,” says Ernesto Medina Aguayo of Aquí La Gente, a pressure group.
The scheme they revile, launched by the dictatorship of Augusto Pinochet 35 years ago, was a model for other developing countries such as Peru and Colombia. Rather than saddle the government with an unaffordable pay-as-you-go system, in which today’s taxpayers support today’s pensioners even as the population ages, Chile created one in which workers save for their own retirement by paying 10% of their earnings into individual accounts. These are managed by private administrators (AFPs).
This article appeared in the The Americas section of the print edition under the headline "The perils of not saving"
The Americas August 27th 2016
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