Latin America
In reply to the discussion: 4 Things to Remember About Chile's 1973 Coup [View all]forest444
(5,902 posts)Chile's private pension system is often cited as the best thing that's ever happened to them (especially by Pinochet apologists), and a model for the region and the U.S.
What many do not know is that each account pays 30% commissions from the top, and consequently 80% of Chilean retirees end up with nothing or close to it in their pension accounts. They thus depend on a state subsidy to cover the minimum $200 pension Chilean law guarantees - and Chile's expensive (Pinochet, btw, left out the police and military from the scheme; they get state-run $1,500 pensions).
So that's a "private" pension system for you: the profits are private, but the state, in Chile's case, spends 6% of GDP - one third of its federal budget - on bailing out retirees with hollowed-out pensions. Sweet!
Chile can afford to do this thanks to its copper - which nets it $40 billion in exports and mostly remains state-owned. Nevertheless, calls for a switch to a national social security system, or least a choice between the two, have been growing.
Argentina had a smilar experience with its private pension funds between 1994 and 2008 - when they were nationalized by the much-demonized Cristina Kirchner administration. Argentina did keep the private option - but almost nobody takes it.
Minimum pensions in Argentina meanwhile rose from $50 a month to $450 by the time she left office 7 months ago, with 70% of prescriptions issued free of charge. Were they still doling out $3 billion a year to bail out private pension funds, they probably couldn't have afforded these improvements.