(October 1, 2013) – Chile’s nation-wide and privately-run defined contribution (DC) scheme has been posting some robust results, according to a study.
Male workers who contributed 10% of their paychecks over a 40-year career replaced an average 87% of their salary in monthly retirement income. For women, however, that figure was 58%.
On average, the study showed Chileans replaced 71% of their ten highest salaried years with post-retirement payouts.
Dictuc, a consultancy affiliated with the Catholic University of Chile, performed the research, taking into account data from 28,000 households. It was commissioned by the country’s Administradora de Fondos de Pensiones (Pension Fund Administrators), private institutions responsible for handling DC assets.
As with Australia, retirement contributions are mandatory in Chile.
Chile’s system came eighth in the world in Mercer Australia’s latest annual global pension index. It beat out the United States, France, Germany, Singapore, Poland, and Brazil with a rating of C+.
Denmark achieved the only A.
According to Mercer’s report, Chile’s retirement scheme has some good features, but should raise its mandatory minimum contribution level. Furthermore, the study recommended “introducing a requirement that part of the retirement benefit must be taken as an income stream.”
This would, of course, capitalize on the Chilean system’s proven strength at providing income—for half the population, at least.
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