Chilean Pension Reform: Coverage Facts and Policy Alternatives/Comments

The Chilean pension reform has given rise to significant debate in the last decade. It was the first pension system in which the core mechanism for producing pensions is individual capitalization and the first to hand over its management to the private sector. This pension concept is one of the rare institutions exported from Chile to the rest of the world, including countries in Latin America, central and eastern Europe, Africa, and Asia, as well as a few developed countries such as Sweden. This paper studies the reasons behind the low coverage of the Chilean pension system by focusing on one benefit -- namely, old-age pensions. The main results of this paper show that under current circumstances a considerable group of old-age retirees will receive pensions below the level of the minimum pension guaranteed by the state. At the same time, most of them will not be eligible for that state guarantee.