• by Manuel Riesco
• Wednesday, October 21, 2009
• Inter Press Service

Chile's private pension system lost 30 percent of its overall value during the current financial crisis, writes Manuel Riesco, a Chilean economist, vice president of the Centre for National Studies of Alternative Development (CENDA), and director of the Foundation for Overcoming Poverty.

In this analysis, Riesco writes that the public pension system was privatised in 1981 by the government of General Augusto Pinochet. Participants in the public system were pushed to switch to the Administrators of Pension Funds (AFP) without the possibility of switching back, assured that they would receive better returns and handsome pensions.

Administrative costs have been scandalous: the AFP and related insurance companies have pocketed one-third of all contributions to the system since its creation in 1981. Meanwhile, for workers with equivalent work history, pensions of those who stayed in the public system have been double those in the AFP plan.

(*) Manuel Riesco, a Chilean economist, is vice president of the Centre for National Studies of Alternative Development (CENDA) and director of the Foundation for Overcoming Poverty.

//NOT FOR PUBLICATION IN CANADA, CZECH REPUBLIC, IRELAND, POLAND, THE UNITED STATES, AND THE UNITED KINGDOM//

© Inter Press Service (2009) — All Rights Reserved. Original source: Inter Press Service

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