FIAP

Malaysia (1951)

Law: Employees Provident Fund (EPF) Act 1951 This Law was amended over time, the most recent amendments being in 1991 [EPF Act 1991, see here]

Date Passed: 1951

Type of System: Multipillar, comprising:

A first non-contributory pillar (social assistance program for needy senior citizens).

A second mandatory pillar with two components:

A PAYGO social security program, for those who are mandatorily covered by the EPF (there is no voluntary coverage in the social security program).
The government-managed Provident Fund for Workers (EPF), a system of accumulation in individual accounts, for different purposes.

Note: The EPF provides two types of individual accounts for members under 55: Account 1, which finances the old-age pension, and Account 2 that can be accessed before retirement for educational purposes, certain critical illnesses, purchasing a dwelling, and other types of expenses. Fund members with sufficient savings may choose to invest a portion of their Account 1 balance with an external fund manager. When an EPF member turns 55, Accounts 1 and 2 are consolidated into a single account (Akaun 55) and a separate account (Akaun Emas) is created for contributions after age 55.

A third private occupational pensions pillar. The provision of supplementary pensions is not widespread in Malaysia, and is mainly limited to large employers. To provide supplemental retirement benefits, employers can increase their contributions to the EPF or establish a personal trust fund. The former is the most popular option, particularly for defined contribution plans. In general, the provision of private pensions is rare in Malaysia, as the EPF provides an important source of income. Although there are high mandatory contribution rates for the basic pension, few tax incentives support the development of a second comprehensive pillar.

Startup Date: 1951

Managing Agencies: The EPF is managed by the State.

Supervising Agency: The Ministry of Finance (http://www.treasury.gov.my) provides general supervision of the pension fund program (provident funds). The Workers Provident Fund (http://www.kwsp.gov.my), managed by a tripartite Board of Directors, manages contributions and benefits and is responsible for investing members’ funds. The Ministry of Human Resources (http://www.mohr.gov.my) provides general oversight of the social insurance program. The Social Security Organization (SOCSO) (https://www.perkeso.gov.my), managed by a tripartite Board of Directors, manages the social security program and collects contributions.

Enrollment:
Enrollment in the EPF is mandatory for all private sector employees, and public sector employees not covered by the independent public sector pension system. It is voluntary for some other types of workers.

Contributions/Assignments:

In the social security (PAYGO) system, the worker and the employer both contribute 0.5% of the worker’s salary, totaling 1%.

In the EPF, workers under 60 contribute 11% of their salary. The employer contributes 13% on salaries less than or equal to RM 5,000 (approx. USD 1,238), or 12% on salaries above RM5,000. In other words, the total EPF contribution rate for those under 60 years of age could be 23% (on salaries greater than USD 1,238) or 24% (on salaries less than or equal to USD 1,238).

In the EPF, Malaysian nationals aged 60 or older contribute 0% (permanently resident foreign nationals contribute 5.5%), at any salary level. Employers, in turn, contribute 4% on the salaries of Malaysian nationals (6% for permanently resident foreign workers with wages above RM 5,000; and 6.5% for permanently resident foreign workers with wages equal to or less than RM 5,000). I.e., the total EPF contribution rate for Malaysian nationals aged 60 or more could be 4%; for foreign workers with permanent residence and a salary of more than 5,000 ringgits, 11.5%; or 12% for foreign workers with permanent residence and a salary less than or equal to 5,000 ringgits).

Pensions/Benefits:

Account 1: 70% of monthly contributions go to this account for financing old-age pensions. The account balance can only be withdrawn when the account holder turns 55, becomes disabled, or leaves the country. In these cases, the entire account balance can be withdrawn. Withdrawals can be postponed by continuing contributions or by withdrawing the dividend from savings annually.

Account 2: The remaining 30% of the monthly contributions are allocated to this second account. Assets accumulated in Account 2 can be used for: Medical expenses; Home loans; paying off the balance of a mortgage loan; financing of education; or for any other purpose after the member turns 50. Withdrawal of savings from Account 2 is subject to certain eligibility requirements, such as stipulating that the member is at least 50 years of age, as well as restrictions on the amount that can be withdrawn. The frequency of withdrawals depends on the intended purpose. Savings for financing education can be withdrawn each semester or academic year; savings to pay off housing loans can be made once a year, but withdrawals for purchasing a dwelling can only be made for the first dwelling.

On turning 55, fund members can make a total or partial withdrawal via: an overall payment (employee and employer contributions, plus compound interest, minus previous withdrawals); a monthly payment of at least 250 ringgits for at least one year, up to age 75; a payment at any time of at least 2,000 ringgits per month; a combination of the latter two options; or a payment of only the annual dividend, keeping the principal in Account 1.

Members of the EPF are not required to retire at age 55, and can withdraw all or part of their funds (Accounts 1 and 2) and continue working until age 100. Fund members who are still working and do not withdraw their funds at age 55 must carry on contributing to the EPF (Akaun Emas account). Fund members who withdraw all of their funds at age 55 can choose to rejoin and contribute to the EPF if they are still employed or working a new job.

State Guarantee: The government pays a non-contributory welfare pension, subject to means-testing, for all members aged 60 or more, with no financial support from other family members.

(Last updated: December 2020)

Singapore (1955)

Law: Central Provident Fund (CPF) Act 1953, [see here]

Date Passed: 1953

Type of System: Singapore’s pension system is one of the oldest and most developed national systems in Asia. The system is primarily based on a single pillar: the Central Provident Fund (CPF), which covers most social security functions. There is no pooling or redistribution of social risk and no comprehensive social security system. People depend exclusively on the defined contribution funds that accumulate in their individual CPF accounts. There is also a non-contributory PAYGO pension plan, known as the Government Pension Scheme, for some categories of civil servants, as well as a Savings and Employees plan for certain categories of armed forces personnel. The Supplementary Retirement Scheme, a voluntary private pension plan without employer participation, and with tax advantages, completes the country’s pension landscape.

Note: The CPF provides four types of individual accounts for each member: an Ordinary Account (OA) for financing home purchases, approved investments, life and mortgage insurance, and education; a Special Account (SA), mainly for retirement (one can invest in financial products related to retirement); a MediSave (MA) account for certain medical and hospital expenses; and a Retirement Account (RA) opened at age 55, to fund monthly payments on retirement.

Start-up Date: 1955

Managing Agencies: The CPF is managed by a tripartite board of representatives of the government, workers, employers and industry, appointed by the ministers. The CPF is responsible for the custody of the funds and for managing the program. However, it has no investment responsibilities. The Singapore Government Investment Corporation (GIC) is the body responsible for investing the plan’s assets.

Supervisory Agency: The Ministry of Human Resources (https://www.mom.gov.sg) provides policy oversight through its Income Security Policy Division. The Board of Directors of the Central Provident Fund (https://www.cpf.gov.sg), comprising a tripartite board and a Chairman, manages the programs, including the custody of the fund, the collection of contributions and the payment of benefits.

Membership:
Membership in the CPF system is mandatory for employed individuals, including most categories of public sector employees, as well as the self-employed with annual net incomes above S$ 6,000 (MediSave account only).

Contributions/Assignments:

In the CPF, workers contribute 20% of their monthly salary of at least 750 Singapore dollars, if they are under 56 years of age, 13% if they are between 56 and 60 years of age, 7.5% if they are between 61 and 65 years of age, or 5 % if they are 66 or older.

Employers contribute 17% of the salary of at least 750 Singapore dollars for workers under 56 years of age, 13% for workers between 56 and 60 years of age, 9% for workers between 61 and 65 years of age, or 7.5 % for workers aged 66 or more.

Insured individuals who earn at least S$ 500, but less than S$ 750 per month, pay a fixed monthly amount based on age and income. Contribution rates for pensioners are reduced.

1% to 23% of the combined worker/employer contributions of insured individuals with a monthly income of at least S$ 750 are assigned to the Ordinary Account, 1% to 11.5% to the Special Account, and 8% to 10.5% to the MediSave Account, depending on age. The MediSave Account covers the cost of hospitalization and medical expenses. A certain maximum amount of the Ordinary and Special Account funds is transferred to the Retirement Account at age 55.

Summary

Worker’s age	CPF contribution rates (monthly salary> = $ 750)
Worker’s age	Employer (% of salary)	Worker (% of salary)	Total (% of salary)
Under 56	17	20	37
Between 56 and 60	13	13	26
Between 61 and 65	9	7.5	16.5
66 and over	7.5	5	12.5

Source: https://www.cpf.gov.sg/employer/employer-obligations/how-much-cpf-contributions-to-pay

Pensions/Benefits:

Ordinary and Special Accounts: A lump sum comprising the retirement account balance in excess of the required minimum balance is paid, or S$ 5,000, whichever is greater.

The minimum balance required in the retirement account varies depending on when the insured turned 55: from S$ 80,000 (if he/she turned 55 between July 1, 2003 and June 30, 2004) to S$ 171,000 (if he/she turned 55 between January 1, 2018, and December 31, 2018).

Interest rate: The Ordinary Account interest rate is 2.5%, or the average interest rate of the main local banks in the last three months, whichever is higher. The interest rate for the special, MediSave and retirement accounts is based on the current minimum interest rate of 4%, or the 12-month average yield on 10-year Singapore government securities plus 1%, whichever higher. The first S$ 60,000 of a member’s combined savings (including up to S$ 20,000 from the regular account) generate an additional 1% per year. Members aged 55 and more will also earn an additional 1% interest on the first S$ 30,000 of their combined savings (with up to S$ 20,000 from the Ordinary Account). CPF’s Board guarantees a minimum interest rate of 2.5% per annum on all accounts. Interest is calculated monthly and is compounded and paid annually.

Retirement account: funds can be withdrawn to purchase a life annuity from CPF’s Board, or from the insurers approved for such purposes. Members with at least S$ 60,000 in their retirement accounts at age 65 must purchase the life annuity provided by CPF’s Board (CPF LIFE). Up to half of the required minimum balance in the retirement account can be withdrawn.

MediSave account: The sickness benefit (employer’s responsibility) is 100% of the worker’s gross salary and is paid for up to 14 days per year (up to 60 days if hospitalized). The maternity benefit (responsibility of the employer and related to employment) in turn, is 100% of the gross salary of the worker, paid for up to 16 weeks (for the first and second child; the employer pays the first eight weeks and the government pays thereafter; for each subsequent child, the government pays the entire 16 weeks). The maximum maternity benefit is S$ 10,000 for each four-week period.

State Guarantee: The government pays a means-tested non-contributory welfare pension for all CPF members aged 65 or more with total contributions of up to S$ 70,000 at age 55 and a per capita monthly household income of up to S$ 1,100. Self-employed individuals must have an average annual net business income of up to S$ 22,800, between the ages of 45 and 54. They must live in public housing with fewer than seven bedrooms and must not own property with five or more bedrooms, or be married to someone that does. Between S$ 300 and S$750 is paid per quarter, depending on the beneficiary’s place of residence.

(Last updated: December 2020)

Denmark (1964)

Law: The law that created the Labor Market Supplementary Pension Fund (Arbejdsmarkedets Tillægspension, ATP)

Date enacted: 1964 (ATP)

Type of System: Multipillar system, comprising:

Public system based on residence (folkepension), comprising two different elements: (i) A basic flat-rate amount (flat rate) linked to the number of years of residence of the beneficiary; (ii) The means-tested supplementary pension.

The folkepension is a PAYGO system funded by the general budget (via general taxes) and the central government reimburses the municipalities, which pay pensions.

The official retirement age is currently 65 for men and women, but it will progressively increase to 67, by six months per year, from 2024 to 2027.

Danish residents qualify with a minimum of three years of residence, from age 15 to 65/67, and non-Danish citizens with a minimum of 10 years (including the last five years prior to retirement).

The basic full pension amount is 74,844 Danish kroner (DKK) per year, equivalent to approximately 18% of the average income in Denmark. The pension is paid to retirees who are single, married or in a common-law marriage, and can be accessed after 40 years of residence. It is reduced proportionately by the number of years of residence less than 40.

A series of supplementary schemes, legally regulated, mandatory, fully funded and with different purposes and administrative structures, of which the most relevant, in terms of coverage, is the Labor Market Supplementary Pension Fund (Arbejdsmarkedets Tillaegspension, ATP).

Started operating: 1964 (ATP)

Managing agencies: The ATP is government-managed.

Supervising agency: The Ministry of Labor (http://bm.dk/) provides general oversight and manages the universal program throughout the country. The Danish Financial Supervisory Agency (https://www.finanstilsynet.dk) supervises the universal program. The Labor Market Supplementary Pensions Institute (https://www.atp.dk), and independent institution governed by a bipartite board of directors, manages and collect contributions for the Social Security program.

Enrolment:
The ATP is open to all employees between 16 and 67 years of age, as long as they work more than 9 hours a week. Enrolment in this system is voluntary for self-employed workers.

Contributions/Assignments: The ATP is funded by lump sum contributions (negotiated between the relevant Social Security players as part of collective agreements) paid by employers (2/3 of the total) and employees (1/3).

The right to a pension in this ATP is based on “what you pay is what you obtain.” Basically, a generation finances its own rights and the system does not consider intergenerational transfers. Pension rights are nominal rights guaranteed for life and paid after the official retirement age.

Contributions depend on the number of hours worked. Thus, for example, the annual contribution for a full-time employee working 37 hours per week in 2017 was DKK 3.408 (less than 1% of the average national salary). In this case, the employer finances up to DKK 2.272 (2/3) per employee per year, and the employee finances the remaining DKK 1.136 (1/3). The annual contribution of self-employed workers is also DKK 3.408.

Pensions/Benefits: The ATP has the same age requirements as the Folkepension, so members can access a pension at age 65 (67 as of 2027), and there is no minimum qualifying period.

Pension benefits depend on how many years of contributions were paid and are a maximum of 41% of the basic state pension. The pension is paid as a lump sum if the balance is less than an established amount, or via a life annuity, subject to taxation.

If a person defers the ATP pension, the pension amount increases by 5% per year of deferment between ages 65 and 75. Another important point is that ATP pensions are adjusted in accordance with the financial resources of the system.

As of 2010, employers had to pay the ATP contributions of employees, even if the beneficiary postponed retirement or is already receiving a pension. Prior to 2010, contributions were not mandatory after the official retirement age.

Deferment guarantees a much higher ATP pension, since the estimated increase percentages range from 8% for a deferment of 1 year, to 130% for a deferment of 10 years.

The ATP plays an important social role, which is not covered by private occupational schemes, due to its labor-related nature. In fact, the contributions of individuals on maternity leave or the beneficiaries of unemployment insurance, to the second occupational pillar, are suspended. To compensate for this, the ATP contribution during maternity leave or unemployment insurance is doubled.

Maternity and paternity benefits are granted for up to a total of 52 weeks. During that time, beneficiaries pay 1/3 of the contribution, and 2/3 is paid by the municipality. Unemployed individuals taking care of children after the maternity period usually switch to another system that also requires an ATP contribution.

While an individual is unemployed, an unemployment insurance fund (or the municipality, if the recipient has no insurance) pays the ATP contribution. The government pays 2/3 of contributions when the unemployment insurance is exhausted and the individual is still unemployed.

State Guarantee: All Danish residents are entitled to receive a general pension (social or folkepension) on turning 65 (see point 1 of this description).

(Last updated: December, 2020).

Chile (1981)

Law:
Decree Law 3,500

Date Passed:
November 4, 1980

Type of System:
Multipillar system comprising a non-contributory public system (first pillar/solidarity pillar) and a mandatory contributory private system based on individually funded savings (second pillar), which completely replaced the public PAYGO system. People can also make voluntary contributions (third pillar).

Startup Date:
May 1981

Managing Agencies:
The Pension Fund Managers (AFPs) collect and manage social security contributions.

Supervising Agency:
The AFPs are supervised by the Pensions Commission, a specialized technical entity dependent on the Ministry of Labor and Social Security, also responsible for interpreting the Law and issuing complementary regulations (www.spensiones.cl).

Enrollment:
All new dependent workers who entered the labor market for the first time as of January 1, 1983 were mandatorily enrolled. The 2008 Pension Reform stipulated a gradual increase in the contributions of self-employed workers who issue fee slips, in order to equalize rights and obligations between dependent and self-employed workers. Pursuant to the law governing self-employed workers, all individuals who issue fee slips or receive payment slips for third party services, had to gradually enroll in the system between January 2012 and January 2018 (with mandatory contributions starting in 2018 and materializing in the 2019 income tax filing process), thus incorporating all of these workers into the system. Since April 2019, self-employed workers who issue fee slips have made mandatory contributions to the social security system, allocating a % of the withheld amount for paying the pension contribution. The withheld amount was 10.75% of gross income in 2020 and is 11.50% in 2021, with 10% corresponding to the payment of taxes and the difference to pension contributions. The withheld amount will increase to 17% by 2028.

Workers assigned to the PAYGO system were also given the option of switching to the new system. After 2009, new members also had to enroll in the AFP that won the tender, assigned by price, and remain in it for a maximum of 24 months (older members can freely switch fund managers).

Contributions/Assignments:
Contributions are a percentage of members’ salaries or incomes, with a taxable ceiling of 80.2 Unidades de Fomento (USD 3,278 as of Dec. 2020). The contribution rate is 13.53%, of which 10 points go to the individually funded account, plus an additional commission on the income, determined by each fund manager, including the disability and survival insurance premium. Employers must Insurance premium and workers must pay the commission on the salary charged by the AFPs. As of December 2020, the commission charged by the AFPs has fluctuated between 0.69% and 1.45% of the salary, with a weighted average per number of contributors of 1.23%. On the same date, the disability and survival insurance premium (paid by the employer for dependent workers and by self-employed workers themselves) was 2.3% (the same for all AFPs).

Pension Modes:
This system grants old-age, disability and survival pension benefits (in early retirement and retirement at the official retirement age). The retirement age is 62 for women and 65 for men. There are 4 types of pensions: Programmed Withdrawal (RP); Life Annuity (RV); Temporary Income (RT) with Deferred Life Annuity (RTRV); and Programmed Withdrawal with Immediate Life Annuity (RPRV). Members can freely choose between them, but the life annuity must be equal to or greater than the basic old-age solidarity pension. Furthermore, the deferred life annuity cannot be less than 50% or greater than 100% of the first temporary income payment. Once retired, one can withdraw freely available surpluses in all pension modes, i.e., the part that exceeds the balance necessary to finance a reference pension.

State Guarantee
The State guarantees a minimum pension to members with 20 years of contributions, and to those who cannot access a pension with the amount accumulated in their individually funded accounts. Members who initially chose to enroll in the new system, are entitled to the Recognition Bond, an instrument issued by the government, for the total amount of the contributions recorded in the former PAYGO social security system. To be entitled to this Bond, members must have contributed to the former pension system for at least 12 months, between November 1975 and October 1980.

The State also provides an old age and disability solidarity pension (Basic Solidarity Pension, PBS, and a Solidarity Pension Contribution, APS), for all members of family groups in the poorest 60% of the population, who are not entitled to a pension in any pension system, either as the retiree or as a beneficiary of a survival pension. Note: The solidarity pension system replaces the minimum state-guaranteed pension program (PMGE); people receiving the old age or disability minimum pension as of July 1, 2008, will continue to receive it. However, they may opt for the solidarity pension system at any time, in accordance with the applicable regulations. This option can be exercised once only.

(Last update: December 2020).

Australia (1992)

Law:
Occupational Pension Fund / Pension Guarantee Act [Superannuation Guarantee (Administration) Act, 1992].

Date Passed:
January 1992.

Type of System:
Multipillar system comprising a first noncontributory pillar that offers a basic universal pension denominated “Age Pension” (funded with general taxes; for low-income individuals over 65); a second mandatory, contributory occupational pillar (Superannuation Guarantee, SG), in which employers make contributions on behalf of their employees; and a third voluntary pension savings pillar (Retirement Saving Accounts, RSA, established in 1997, offered by banks and life insurance companies).

Startup Date:
July 1, 1992

Managing Agencies:
The law requires second-pillar pension funds contracted with life insurance companies and banks [Private sector business funds; Small APRA Funds (SAFs); Retail pension funds (Retail Funds)], to be managed by trusts. The exception to the above are the public sector corporate funds. Both individuals and bodies corporate can act as trustees, and there must be a Board of Trustees. The trustees are responsible for the prudent management, transactions and investments of the pension fund.

Supervising Agency:
Unified oversight by the Australian Prudential Regulation Authority (APRA, www.apra.gov.au).

Membership:
Enrollment in the second occupational pillar is mandatory for all dependent workers.

Contributions/Assignments:
In the second mandatory pillar, companies must contribute 9.5% of their employees’ wages (this contribution will gradually increase by 0.5 percentage points per year as of 2021, to reach 12% by 2025), and they may also make voluntary contributions.

Pensions/Benefits:
Workers can access their accumulated funds through a lump sum withdrawal or through a Life Annuity after they turn 60.

State guarantee
Low-income individuals over the age of 65 are guaranteed a universal non-contributory pension (“Age Pension”).

(Last updated: December 2020)

Peru (1993)

Law:
Law 25,897.

Date Passed:
December 6, 1992.

Type of System:
Multipillar system comprising a non-contributory public system (first pillar, retirement at 65, not universal ) and a mandatory mixed contributory system (second pillar) in which the public PAYGO system competes with the private Individually Funded Savings System. Members can also make voluntary contributions (third pillar).

Startup Date:
June 1993

Managing Agencies:
The pension funds are managed by the AFPs in the private system.

The PAYGO system is managed by the Office for Social Security Standardization (ONP).

Supervising Agency:
Private System: Superintendency of Banking, Insurance and AFPs (www.sbs.gob.pe).

Enrollment:
Enrollment in a pension system is mandatory for all dependent workers, who must choose between the public or private system.

Contributions/Assignments: Workers who remain in the “Commission on income” scheme contribute 12.95% of their taxable income to the private system, on average, as of 12.31.2020. 10% of that contribution is paid into the individually funded account and the rest is distributed between the Insurance Company (financing of disability and survival insurance – 1.35%) and the AFP (1.60%).

The contribution to the PAYGO system is 13%.

Contributions to pension systems are not tax deductible.

Pensions/Benefits: The private system provides retirement, disability and survival pensions. There are six pension modes: (i) Programmed Withdrawal (RP); (ii) Family Life Annuity (RVF); (iii) Temporary Income with Deferred Life Annuity (RTRVD); (iv) Mixed Income; (v) Dual Currency Income; and (vi) Combined Income. In RP, the pensioner assumes the return and longevity risks, but maintains ownership of the funds. In VR, the pensioner transfers the return and longevity risks to the insurance company, but loses ownership of the funds; in RVF, pensioners take out a life annuity with an AFP until their death, assigning it the balance of their accounts; RTRVD is a combination of VR and RP. RVD cannot be less than 50% of the first monthly RT payment, or more than 100% of said payment. Pensioners can receive their pension in indexed New Soles, in dollars, or in both currencies, in the RVF mode; In Combined Income, 2 simultaneous pensions are contracted: an RV in New Soles and an RP (they can only be received if the RV is equivalent to the value of the minimum State-guaranteed pension. In the Mixed Income mode, 2 simultaneous pensions are contracted: an RV in dollars contracted with an insurance company and an RP in New Soles (they can only be received if the RV is equivalent to the value of the minimum state-guaranteed pension); and in the Dual Currency Income mode, 2 life annuities are contracted simultaneously, one in New Soles, and the other in dollars. Note: A law was enacted on June 29, 2016, which stipulates that members may use 25% of such funds at any time, to: (a) make a down payment for the purchase of a first property, as long as it involves a mortgage loan granted by an agency of the financial system; or (b) repay a mortgage loan used for the purchase of a first property, granted by a financial agency. The law also states that: (i) after 65 years of age, members may choose between receiving their pensions in any pension mode, or requesting the AFP to pay out up to 95.5% of the total amount of the fund available in their individual accounts (in the installments they choose); (ii) members who exercises the option of withdrawing their funds, will not be entitled to any state guaranteed pension; (iii) the remaining 4.5% of the Individual Account must be withheld by the AFP and transferred directly to EsSalud (for health coverage); (iv) the above applies to members of the Special Early Retirement Regime and to retirees in the Programmed Retirement mode.

State Guarantee
The State only began guaranteeing a minimum pension in 2002. An item has been assigned to the Recognition Bond in the Budget of the Republic. The State also pays a non-contributory pension (“Pension 65” Program) of PEN 125 per month (approx. USD 34), from the age of 65, to those in extreme poverty, who are not receiving a pension from any pension system.

(Last updated: December 2020)

Colombia (1994)

Law:
Law 100/93 (amended by Law 797, in January 2003).

Date Passed:
December 1993

Type of System:
Multipillar system comprising a non-contributory public system (first pillar); and a mandatory mixed contributory system (second pillar), in which the public defined-benefit Average Premium Plan (RPM) competes with the private Individual Solidarity Savings System (RAIS). People can also engage in voluntary pensions savings, with tax incentives (third pillar).

Startup Date:
1994

Managing Agencies:
The Pension Fund Managers (AFPs) manage the individual accounts in the individually funded savings system.

Supervising Agency:
Financial Superintendency of Colombia (www.superfinanciera.gov.co).

Enrollment:
Workers can choose between the Average Premium Solidarity System or the Individual Savings with Solidarity System. After the initial decision, they can switch systems only once every 5 years, except if they are 10 years or less from the official retirement age.

Contributions/Assignments:
The contribution rate to the Individually Funded Savings System by dependent workers is 16% of the monthly taxable base income, of which 75% is paid by the employer and 25% by the enrolled member (11.5% goes to the individually funded account; 3% is distributed between the payment of the disability and survival insurance premium and the Fund Manager’s management commission; and 1.5% goes to the minimum Pension Guarantee Fund).

Self-employed workers contribute 16% on 40% of their monthly income, distributed in the same way.

The total contribution to the Average Premium Plan is also 16%, but distribution varies slightly; 13% goes to a common fund, and the remaining 3% is the Fund Manager’s commission (Colpensiones).

All members contributing on income greater than 4 to 16 times the minimum wage pay an additional contribution of 1% to the Pension Solidarity Fund (FSP), and those contributing on income of 16 to 25 times the minimum wage, pay contributions on a sliding scale up to a maximum of another percentage point to said fund.

Pensions/Benefits:
Members can choose between 5 pension modes: Life Annuity (RV); Programmed Withdrawal (RP); Temporary Variable Income with Deferred Life Annuity (RTVRVD); Temporary Variable Income with Immediate Life Annuity (RTVRVI); and Programmed Withdrawal without negotiation of the Pension Bond (recognition of contributions to the RPM for members who switch to RAIS). In 2012, the “Family Pension” was added, which enables adding contributions from spouses or partners to meet the pension requirements.
Pensions cannot be less than a minimum wage, which is similar to the average income of the employed. Pensions greater than 10 legal monthly minimum wages in force, and up to 20, must contribute 1% to the Pension Solidarity Fund, and those who earn more than 20 minimum wages contribute 2%.

State Guarantee
There is a Minimum Pension Guarantee (GPM) for RAIS (Private) members who do not have sufficient balances to finance this pension and meet the eligibility requirements. The GPM is first paid with the pensioner’s savings, and when this is exhausted, the Minimum Pension Guarantee Fund pays;
There is also a Solidarity Pillar (Social Protection Program for the Elderly) for the low-income population over 65, which consists in a monetary subsidy every two months.
There are also the BEPS (Periodic Economic Benefits), which are an alternative mechanism for old age pension savings in individual accounts, managed by Colpensiones, independent of the General Pension System. They enable incorporating balances saved in the SGP into this BEPS account, to grant a monthly income below the Minimum Wage. They are aimed at all individuals who have neither capital nor weeks of contributions to retire, and are classified as vulnerable (based on the SISBEN social policy testing tool). The Government also offers a 20% savings subsidy. Members can access disability and death microinsurance, as well as funeral assistance, depending on their levels and constancy of savings. BEPS cannot be transferred or inherited.

(Last updated: December 2020)

Uruguay (1996)

Law:
Law 16,713

Date Passed:
September 3, 1995

Type of System:
Multipillar or mixed system, comprising a public, contributory defined benefits system; a mandatory, mixed, defined contributions savings system with derived benefits, including the Intergenerational Solidarity Retirement Regime (public PAYGO) and the Individual Savings System (privately funded). Members can also make voluntary contributions to the Savings System. Membership in the system is based on three salary levels and the option of Article 8 (Law 16,713):

1) In the case of members with nominal wages below nominal income cap 1 (approx. USD 1,484 as of 12/31/2020) who have marked the Article 8 option, the contribution is divided into 50% for the PAYGO system and 50% for the individually funded system. In this case, the calculation is as follows: first the total contribution destined to retirement (15% of the nominal salary) is calculated, and then divided in half; 50% remains in BPS and the other 50% is transferred to an AFAP. If workers did not opt for Article 8, all contributions must be made to the PAYGO system (contribution to the individually funded system = 0).

2) When an individual earns wages between income cap 1 and cap 2 (approx. between USD 1,484 and USD 2,225 as of 12/31/2020) and has marked the Article 8 option, 50% of the contribution corresponding to income up to cap 1 goes to the individually funded system and the rest of the contribution goes to the PAYGO system. Workers who did not opt for Art. 8, contribute 15% of their wages up to cap 1 (approx. USD 1,484) to the PAYGO system, and 15% of wages exceeding cap 1 and up to cap 2 (approx. USD 2,225) to the individually funded regime.

3) When Wages are between cap 2 and cap 3 (approx. between USD 2,225 and USD 4,450, as of 12/31/2020), the distribution is different: the part of the contribution up to cap 1 goes entirely to the PAYGO systems, and the rest of the contribution goes to the individually funded system. If the worker’s nominal salary exceeds cap 3, the discount is applied only up to cap 3, and the remaining amount is not subject to contributions and is credited to the worker’s liquid salary. In cap 3 salaries, the contribution corresponding to cap 1 goes to the PAYGO system and the contribution corresponding to amounts between cap 1 and 3, goes to the AFAP.

Startup Date:
April 1, 1996.

Managing Agencies:
The mandatory pension savings funds are managed by the Pension Savings Fund Managers (AFAPs).

The funds of the public PAYGO system (Intergenerational Solidarity) are managed by the Social Security Bank (BPS), which also managers non-contributory benefits, unemployment insurance, health insurance and family allowances.

Supervising Agency:
The AFAP Supervision Division of the Central Bank of Uruguay (www.bcu.gub.uy) is responsible for overseeing the second pillar (wages between Levels 1 and 3) and the third pillar (wages above Level 3) savings systems.

Enrollment:
The law stipulates that all workers whose nominal salary exceeds Level 1 (approx. USD 1,484 as of 12/31/2020), who were under 40 years of age on April 1, 1996, or who, regardless of age, entered the labor market for the first time in an activity covered by the BPS after April 1 1996, are required to enroll. Although it is mandatory for workers to enroll, they are free to choose their AFAP. If workers do not choose an AFAP, the BPS assigns them to one ex officio. Furthermore, Law 19.162 of 01/11/2013, which amends the social-security system, among other changes, stipulates: (a) The possibility of revoking the option for the Mixed System and returning to the PAYGO system: only for people over 40 on April 1, 1996 (the term is until January 31, 2016); (ii) The option of revoking Art. 8 of Law 16.713 and thus modifying the distribution of contributions between the BPS and the AFAP: for members who are between 40 and 50 years of age.

Contributions/Assignments:
The worker’s contribution is 15%, and depending on the amount of the salary and the options chosen (Article 8), this contribution is divided between the PAYGO and the individually funded systems (see “Type of System”).

Pensions/Benefits:
The individual savings system provides old-age, disability and survival benefits. Old-age pensions are granted on the basis of the capital accumulated in the respective individual savings account, the interest rate paid by the insurance company for said capital, and the life expectancy of the member. The new system does not contemplate the issuing of recognition bonds.

Disability and survival contingencies are financed by the Collective Disability and Survival Insurance that the AFAPs are obligated to take out with an insurance company. The premium for this insurance is discounted from the worker when his monthly contributions are paid into his individual account

State Guarantee
There is no minimum amount of the individual savings quota share in the mixed system. The pensions received by workers depend on the balances accumulated in their individually funded accounts (on retirement), and their gender.

The State guarantees an old-age and disability pension (Non-Contributory Old-Age and Disability Pension Program (PNC) – first pillar) to 70-year-old members living in poverty, who cannot cover their basic necessities, or are fully and permanently disabled for all paid work. This pension amounts to USD 286 per month (data updated as of 12/31/2020).

(Last update: December 2020).

Bolivia (1997)

Law:
Law 1,732

Date Passed:
November 1996

Type of System:
Multipillar system comprising a non-contributory public system (first pillar) and a mandatory contributory private system based on individually funded savings (second pillar), which completely replaced the public PAYGO system. People can also make voluntary contributions (third pillar).

Startup Date:
1997

Managing Agencies:
Pension Fund Managers, AFPs. On December 10, 2010, the country’s Senate passed Pension Law No. 065, creating the Comprehensive Pension System (SIP) and eliminating the two AFPs that managed the pension funds. The law also created a new government agency, the Public Long-Term Social Security Administration (GSS), within the Ministry of Economy and Public Finance, which would be in charge of managing the funds. The AFPs continue operating to date, as there is a transition period. When this period ends, the GSS will start fully operating.

Supervising Agency:
Pension and Insurance Supervision and Control Authority (www.aps.gob.bo).

Membership:
Enrollment in the new system is mandatory for dependent workers, and voluntary for self-employed workers.

Contributions/Assignments:
The total contribution of dependent workers is 12.71% of salary, broken down into: the contribution to the individually funded account (10%); the common risk disability and death insurance premium (1.71%); the management commission of the AFPs (0.5%); and the solidarity contribution of the insured (0.5%). Furthermore, if the taxable income is greater than Bs 13,000, the worker must contribute 1%, 5% or 10% to the Solidarity Fund.

The total contribution of self-employed workers is 14.42% of salary, broken down into: the contribution to the individually funded account (10%); the common risk disability and death insurance premium (1.71%); the occupational risk disability and death insurance premium (1.71%), the management commission of the AFPs (0.5%); and the solidarity contribution of the insured (0.5%). Furthermore, if the taxable income is greater than Bs 13,000, the worker must contribute 1%, 5% or 10% to the Solidarity Fund.

Pensions/Benefits:
Pensions are calculated on the accumulated individual fund amount, which is used to purchase a life annuity, or a so-called variable monthly life annuity contract. These contracts are an alternative to purchasing a life annuity.

State guarantee
Although the Government does not guarantee a minimum pension, there is the so-called “Renta Dignidad” or “Universal Old Age Income,” of BOB 4,450 per year (eleven payments of BOB 350 and one of BOB 700) for senior citizens, without a contributory pension and BOB 3,900 per year (eleven payments of BOB 300 and one of BOB 600) for senior citizens with a contributory pension.

(Last update: December 2020).

China (1997)

Mexico (1997)

Law:
Social Security Law – LSS97 (IMSS Workers) | Law of the Institute of Social Security and Services for State Workers – LISSSTE (Workers ISSSTE).

Date Passed:
December 1995 (LSS97); March 2007 (LISSSTE)

Type of System:
Multipillar scheme comprising a contributory system managed by private companies called Pension Fund Managers (AFORES), which totally replaced the public PAYGO system. Enrolled members can also make short and long-term voluntary contributions (third pillar).

Start-up Date: July 1997 (IMSS); April 2007 (ISSSTE).

Managing Agencies:
The Pension Fund Managers (AFORES) are exclusively entrusted with managing the individual pension savings accounts of workers.

Supervising Agency:
National Commission for the Retirement Savings System (CONSAR, https://www.gob.mx/consar).

Enrollment:
Workers entering the labor market after July 1, 1997, must enroll in an AFORE of their free choice. Workers can choose the Pension Fund Managers (Afores) in which their funds will be invested, according to their profiles, investment preferences and age. They will be assigned to a specific Siefore (Retirement Fund Investment Company) depending on their age.

Workers who contributed until June 31, 1997, are entitled to the benefits granted by the former PAYGO pension system, which determines different benefits and waiting periods. Workers who have contributed to both systems can opt for the former PAYGO system, or the new individually funded system, whichever suits them best.

Contributions/Assignments:
IMSS workers – The total contribution rate to the Retirement, Unemployment in Old Age and Old Age Subaccount (RCV) is 6.5% of the worker’s salary, jointly contributed by the worker (1.125%), the employer (5.15%) and the State (0.225%). The Social Contribution (provided by the State) is also deposited in each individual account. It progressively decreases from 6.65% for 1 minimum wage to 0.37% for the ceiling of 15 Measurement and Update Units (UMAS), for every working day, updated in accordance with the table of Article 168, Section IV of the Social Security Law reformed in 2009. For a member with 5 times the Measurement and Update Unit, this Social contribution is 1.22% of salary as of December 2020. Thus, the State’s total contribution to the individually funded old age account is 0.225% + 1.22% = 1.445%. The Disability and Survival Insurance (2.5%) is managed by the Mexican Social Security Institute (IMSS). Workers must contribute 0.625% of their salary, companies 1.75% of salaries, and the State 0.125% to finance this insurance. Thus, the total contribution to the pension system in this case is 1.75% by the worker, 6.9% by the employer, and 1.57% by the State, totaling 10.22%.

Pensions/Benefits:
Due to the defined-contribution nature of the system, retirement benefits depend on the contributions and the effect of compounding of the funds in the individual account. Members can choose between purchasing a life annuity from an insurance company or programmed withdrawals (financial incomes), through the AFORES, which consists in periodic deductions calculated on the basis of life expectancy and expected returns. There are only two pension modes: Programmed Retirement and Life Annuity.

State Guarantee
The State guarantees a minimum pension to workers who meet the retirement requirements (1,250 weeks of contributions and 65 years of age) and have not accumulated sufficient funds, equivalent to a general Minimum Wage for the Federal District, to cover a pension. The Afore pays the pension, charged to the individual account, until it is exhausted, and the federal government subsequently finances said pension. There is also a State-financed social pensions program denominated “Program for the Wellbeing of senior citizens,” which grants MXN 637.5 (approx. USD 32) per month to all senior citizens over 68 years of age throughout the country, and to senior citizens belonging to indigenous peoples, over 65, who live in municipalities.

(Last updated: December 2020)

El Salvador (1998)

Law:
The Pension Savings System Law.

Date Passed:
December 1996

Type of System:
Multipillar System comprising a guaranteed non-contributory minimum state pension (first pillar) and a mandatory savings and individually funded private contributory system (second pillar). Members can also make voluntary contributions (third pillar).

Startup Date:
1998

Managing Agencies:
Pension Fund Managers

Supervising Agency:
Superintendency of the Financial System (http://www.ssf.gob.sv).

Enrollment:
Enrollment is mandatory for all workers entering the labor force for the first time and for all workers under the age of 36 enrolled in the Public Pension System when the system started operating (April 1998). Women who were over 36 years old at the time, but under 50, and men over 36, but under 55, could choose between enrolling in the system and remaining in the public pension system.

Contributions/Assignments:
Contribution to this system is 15% of the worker’s salary, with 7.25% charged to the worker and 7.75% to the employer; the worker’s contribution goes entirely to the worker’s so-called Individual Pension Savings Account (CIAP). Part of the 7.75% contributed by the employer is used for paying the AFP commission and the disability and survival insurance premium (the sum of both of them was a maximum of 1.9% of salary in 2020); the average AFP commission to 31.12.2020 was 0.939%; the insurance premium was 0.962%, another part (5%) goes to the so-called Solidarity Guarantee Account (CGS), and another part (0.85%) to the worker’s CIAP. Thus, the total contribution to the CIAP is: 7.25% (worker) + 0.85% (employer) = 8.10%.

Between 2017 and 2027, 5% of the contribution will go to the CGS. Between 2028 and 2037 it will drop to 4.5%, and then to 4% between 2038 and 2043. It will drop to 3% between 2044 and 2049, and to only 2% in 2050.

The CIAP will always receive 7.25% of the worker’s contribution. What will vary, including the amounts earmarked for the CGS, are employers’ contributions. From 2020 to 2027, employers will pay 0.85% into the CIAP. Between 2028 and 2037 this amount will increase to 1.35%. Between 2038 and 2043, employer’s contributions to the CIAP will be 1.85% of the salaries of workers; between 2044 and 2049 they will be 2.85%, and will then increase to 3.85% as of 2050.

Pensions/Benefits:
The benefits granted by the system include old age, common disability and common hazards survival pensions. There are 3 existing pension modes: Programmed Income; Life Annuities; Programmed Income with Deferred Life Annuity.

Minimum Pension Guarantee:
The Solidarity Guarantee Account (CGS) guarantees a minimum pension to all members who meet the legally established requirements. The State also recognizes the rights acquired in the Public Pension System, by means of a Transfer Certificate, to all those who mandatorily switched to the Pensions Savings System. The State also pays a Basic Universal Pension of US$ 50 per month, to adults over 70 living in the 100 municipalities with the highest poverty rates in the country.

(Last updated: December 2020)

Hungary (1998)

Kazakhstan (1998)

Law:
Kazakhstan Pension Law

Date Passed:
June, 1997.

Type of System:
Multipillar system comprising a non-contributory public system (first pillar) and a mandatory contributory private system based on individually funded savings (second pillar), which completely replaced the public PAYGO system. Members can also make voluntary contributions (third pillar).

Startup Date:
January 1998

Managing Agencies:
The law that provided for the merger of 11 pension funds (10 private and the State GNPF) into a state-managed Unified Accumulative Pension Fund (UAPF) was enacted in June, 2013. This unified fund is the one that manages individual accounts.

Supervising Agency:
Unified supervision by the National Bank of Kazakhstan (www.nationalbank.kz).

Enrollment:
Enrollment in the new system is mandatory for all workers entering the labor market as of January 1, 1998. Individuals with six or more months of contributions in the former PAYGO system will receive their pensions from the former public system.

Contributions/Assignments: Workers contribute 10% of their income to the pension savings funds. They can also make voluntary contributions. Employers also contribute 5% of the salaries of workers in risky or dangerous occupations to their individual accounts, thus making a total contribution rate of 15%.

Pensions/Benefits:
Pension amounts depend on the amounts contributed to the fund, the duration of the fund’s investments and the corresponding rates of return obtained on them. Estimates by government experts consider that with a contribution of 10% of wages, the 35 years of contributions required, a 3.5% annual return rate and a deflated wage increase of 2% per year, a replacement rate of 60% of the average salary earned throughout the working life of an individual could be achieved. The National Bank of Kazakhstan has decreed that second pillar survival, disability and death pensions must be paid as life annuities, leaving the respective beneficiaries to freely choose the life insurance company.

State Guarantee
The State guarantees a minimum pension to women who have contributed to the mandatory system for 20 years, and to men who have contributed for 25 years, as long as the amount of the joint public and private system pension is less than 70% of the legal minimum.

The basic government pension exists, regardless of the accumulated assets. This is determined each year in the government budget.

(Last update: December 2020).

Poland (1999)

Law:
Social Security System Law

Date Passed:
November 1998

Type of System:
Multipillar system comprising a first public PAYGO pillar with a notional defined contribution system (NDC); a second voluntary individually funded savings pillar; and a third voluntary private savings pillar.

Note: A pension reform that made enrollment in the individually funded pillar voluntary for all new entrants into the labor market, came into effect on February 1, 2014. This law also allowed former members of the individually funded program to opt out, and only contribute to the public PAYGO pillar.

Startup Date:
1999

Managing Agencies:
Universal Pension Companies (PTE) have been established for managing Open Pension Funds (OFE).

Supervising Agency:
Unified supervision by the Polish Financial Supervision Authority KNF, www.knf.gov.pl).

Enrollment:
Enrollment in the individually funded system was initially mandatory for all those who qualified for Social Security. Individuals aged 31 to 50 at the time of the introduction of the reform (January 1, 1999) could choose between enrolling in both systems or remaining in the reformed first PAYGO pillar. People over 50 had to stay in the first pillar, whereas those under the age of 30 had to enroll in both pillars.

A pension reform that made enrollment in the individually funded pillar voluntary for all new entrants into the labor market came into effect on February 1, 2014. This law also allowed former members of the individually funded program to opt out and only contribute to the public PAYGO pillar.

Contributions/Assignments:
The total social security contribution rate is 13.71% of the worker’s salary. Of this percentage, 9.76 percentage points (pp) go to old-age pension insurance; 1.5 pp to disability pension insurance; and 2.45 pp to health insurance. If the insured person is a member of a private open pension fund (OFE), the institution that manages social security (ZUS) transfers part of the contribution to the old-age pension insurance (9.76%) to the OFE selected by the insured person. As of May 2011, the part of the contribution transferred to OFE decreased from 7.3 pp to 2.3 pp, and then increased to 2.8 pp in 2013. The difference between 7.3 pp and 2.3 pp/2.8 pp was assigned to a subaccount in the ZUS. As of February 1, 2014, 2.92 pp were transferred to the OFE and 4.38 pp to the subaccount in the ZUS. Members can also choose whether their new contributions will be transferred to the selected OFE, or if the total contribution (7.3%) will be transferred to the subaccount in the ZUS. As soon as insured persons reach the official retirement age, minus 10 years, the entire contribution (7.3%) is automatically transferred to their sub-account in the ZUS and their savings in the OFE are gradually transferred to the sub-account in the ZUS.

Pensions/Benefits:
The first pillar benefits are a life annuity (calculated on the basis of the number of years of life expectancy of the individual, as a ratio of the assets accumulated in the NDC account at the legal retirement age (65 for men and 60 for women). The second pillar benefits are a life annuity.

State Guarantee
The State guarantees a minimum pension for individuals who meet the requirement of 25 years of contributions for men, and 20 years for women.

(Last update: December 2020).

Tajikistan (1999)

Sweden (1999)

Law:
Pensions Law

Date Passed:
June 1998

Type of System:
Multipillar system comprising a first non-contributory pillar that offers a guaranteed minimum pension (financed with taxes, for low-income individuals been resident in the country or at least 40 years), and a second contributory pillar with two programs: (i) public PAYGO program based on notional defined contribution (income-based pensions); (ii) defined contribution individually-funded accounts program (premium pension, PPM). There is also a third “quasi mandatory” pillar of contractual schemes separately covering government employees and private employees, depending on whether they are blue or white-collar workers.

Startup Date:
January 1999

Managing Agencies:
The notional defined contribution scheme is managed by the Swedish Pensions Agency. The private individually funded account system is managed by a public agency (Seventh National Swedish Pension Fund – AP7) that executes the orders of individuals for purchasing and selling the fund’s shares, maintains the accounts, requests and provides information on participating funds on a daily basis, and has a monopoly on the provision of life annuities requested on retirement.

Supervising Agency:
The notional defined contribution system is supervised by the Social Security Agency (www.forsakringskassan.se), whereas the PPM system is supervised by the National Financial Oversight Authority (www.fi.se).

Enrollment:
Enrollment in the public program (NDC) is mandatory for all dependent and self-employed workers born after 1954; enrollment in the individually funded accounts program (PPM) is mandatory for all workers (dependent and self-employed). In the PPM program, workers’ contributions (2.5% of gross salary) are deposited in their individually chosen investment accounts; workers can choose to invest their contributions in up to five of more than 700 investment funds offered by independent fund managers; the Government has established a special fund for people who do not want to make their own investment decisions, and in that case the contributions are automatically invested in the Premium Savings Fund, managed by the AP-7; the worker is free to switch from the chosen fund at any time, and free of charge.

Contributions/Assignments:
16% of salary goes to the notional defined contribution program and 2.5% to the individual private accounts program.

Pensions/Benefits:
Members can request a full or partial pension from the notional PAYGO and PPM schemes, from the age of 61. In the PPM scheme, spouses can jointly apply for an annuity, and members can access a survival pension during the accumulation phase.

State Guarantee
A minimum pension is guaranteed to people over 65 who have not made sufficient contributions for a minimum pension. In this case, the State completes the missing portion.

(Last update: December 2020).

Panama (2000)

Law:
Law 8, Public Servants’ Individually Funded Savings System (SIACAP); and Law 51, Mixed Subsystem.

Date Passed: Individual accounts were implemented in Panama in 1997 with the creation of SIACAP, but only started operating in 2000. Individual accounts were created in the Social Security Fund (CSS) in 2005, as part of the Mixed Subsystem, which only started operating in 2008.

Type of System: Multipillar or mixed system comprising a First Public PAYGO pillar (an Exclusively Defined Benefit Subsystem, SEBD), which coexists with a Second Pillar comprising the SIACAP (mandatory for public servants ) and the Mixed Subsystem (SM), managed by the Social Security Fund (CSS).

The SM, in turn, has two components: (i) A “Defined Benefit” component, the contributions of which go to a common PAYGO solidarity pension fund; (ii) Personal savings component (a new system with individual accounts), which grants a pension based on what insured individuals have saved throughout their working lives.

Finally, there is also a third voluntary savings pillar, managed by private pension fund managers.

Start-up date: SIACAP started operating on July 7, 2000, and the Mixed Subsystem on January 1, 2008.

Managing Agencies: Social Security Fund (CSS) (www.css.org.pa). There are private pension fund managers licensed to manage investments in SIACAP and the individual savings component of the Mixed Subsystem.

Supervising Agency: Oversight department of SIACAP (www.siacap.gob.pa) and Superintendency of the Securities Market of Panama (www.supervalores.gob.pa).

Enrollment: Enrollment in SIACAP is mandatory for all public servants, with the exception of individuals who were receiving pensions on the date the law was passed, and those public servants who met the requirements for obtaining a supplementary pension or retirement by December 31, 1999.

The Mixed Subsystem includes: (i) individuals enrolled in the CSS, who were 35 years old or less on January 1, 2006, and who expressly opted to enroll in this Subsystem before December 31, 2007, which is irrevocable (those who did not exercise the option, will be automatically enrolled in the Exclusive Defined Benefit Subsystem); (ii) all new employees as of 2008. The following individuals will contribute only to the Personal Savings Component: (i) contributing self-employed individuals working for the State, who were 35 years old or less on January 1, 2007; (ii) Contributing self-employed workers who were 35 or less on January 1, 2007.

Contributions /Assignments: In SIACAP, all public servants make a minimum monthly voluntary contribution of 2% of their monthly salary. The State also contributes 0.3% of the salaries earned by public servants per month.

The total contribution rate in the Mixed Subsystem is 13.5% of salary. Only contributions on the first $500 of salary are paid to the PAYGO component of this subsystem. I.e., if the worker has a salary of $ 1,500, for example, 13.5% of $ 500 = $ 67.5 goes to the PAYGO component.

Only 10% of the amount over and above $ 500 goes to the individual account. 2.5% of the total contribution (13.5%), is paid as a solidarity contribution to the common fund of the defined benefit component; 0.93% goes to paying for a life annuity premium for the personal savings component, and 0.07% goes to a disability premium. I.e., following the same example, if the worker has a salary of $ 1,500, 10% of 1,000 goes to the individual savings component (the amount over and above the first $ 500) = $ 100. 1% of $ 1000 = $ 10, goes to paying the life annuity and disability Insurance premium; and 2.5% of 1,000 = $25, is the contribution to the solidarity fund.

Pensions/Benefits: In the SEBD, the regular old-age pension is obtained on meeting the age requirements (57/62 years, Women / Men) and required contributions (240). The pension amount is calculated on 60% of the average monthly salary of the 10 best years of contributions. This percentage can be increased to the minimum required, with each additional year of contributions. The maximum pension amount is $ 1,500 and the minimum is $ 255.
SIACAP grants benefits in addition to the permanent disability and ‘absolute permanent disability due to professional risk and old age’ pensions, which are granted to public servants pursuant to the Constitutional Framework Law of the Social Security Fund.

In the defined benefit component of the SM, the regular old age pension requirements and amounts are the same as in the SEBD, and the maximum pension amount is $ 500 (which is achieved with 52 years of contributions).

To obtain the regular old-age pension in the personal savings component of the SM, the same contribution and age requirements are established as in the Defined Benefit component. The pension amount is calculated by dividing the total amount contributed and compounded in the savings account, by the actuarial value of the life expectancy, considering a discount rate to be defined by the CSS.

State Guarantee: The payment of old-age pensions in the Mixed Subsystem is guaranteed, even if savings have been exhausted. The State also pays a non-contributory (conditional) pension of USD 120 per month (“120 at 65” Program).

(Last updated: December 2020)

Costa Rica (2000)

Law:
Law 7,983 or the Workers’ Protection Law.

Date Passed:
February 2000

Type of System:
Multipillar system comprising the non-contributory public system of the Costa Rican Social Security Fund (first pillar); a second pillar comprising the Mandatory Complementary Pension System, individually funded and managed by pension fund managers; and a third pillar comprising the individually funded Voluntary Complementary Pension System, managed by Complementary Pension Operators (OPC).

Startup Date:
2000 (Mandatory Complementary Pensions Regime).

Managing Agencies: The Costa Rican Social Security Fund (CCSS) manages the Disability, Old Age and Death Insurance. The funds of the individually funded Mandatory Complementary Pensions Savings System are managed by the Complementary Pension Plan Operators (OPCs).

Supervising Agency:
Pensions Commission (www.supen.fi.cr), an autonomous body dependent on the Central Bank of Costa Rica.

Enrollment:
Enrollment in the second pillar is mandatory for all dependent workers (in the public and private sectors). At the beginning of the employment relationship, the worker must choose an OPC to manage his funds in the pension fund (ROP) and the labor capitalization fund (FCL); If he fails do so, the account will be managed by the operator of the Banco Popular y de Desarrollo Comunal, and the Capitalization Fund managed by the operator of the Costa Rican Social Security Fund (CSSS), or if the worker is enrolled in the Pension System of the National Magisterium, both accounts will be manage by the Magisterium operator.
All workers are entitled to switch OPCs at no cost, but in order to exercise this right, at least 1 month must have elapsed since the last time they switched from one operator to another. Workers can also switch operators, even before 1 month of permanence, when the operator increases the commissions it charges, or if there is a merger or absorption between it and another authorized agency.

Contributions/Assignments:
The contribution rate to the savings and individually funded Mandatory Complementary Pensions System is 4.25% of the worker’s taxable income (fully paid into the member’s account). Of this percentage, 1% is contributed by the worker and 3.25% is contributed by the employer.

The Disability, Old Age and Death Regime of the CCSS is also financed with 5.25% of the salary by the employer, 4.00% by the worker and 1.41% provided by the State, totaling 10.66%.

Pensions/Benefits:
Pensions can be received as a life annuity from an insurance company, or through an OPC, through a permanent income or programmed withdrawal (or both). In permanent income, the pensioner periodically receives the interest generated by the fund and keeps the principal in the agency, which delivers it to the designated beneficiaries at the time of the pensioner’s death. In programmed withdrawal, a periodic sum is received from the individual account, for a period in accordance with the life expectancy at the time of withdrawal. If the right to a pension is acquired within the first 10 years that the Workers’ Protection Law has been in force, members can withdraw the entire fund, if they so wish.

State Guarantee
The fund managers are responsible for the integrity of the contributions of workers and contributors with their assets, and if they are insufficient for covering the damage, the State will pay in the missing contributions and proceed to liquidate the fund manager. The State is also responsible for managing the enrollment and transfer system through the CCSS, and the Regulation and supervision of the system, through the National Social Security Council, the National Council for the Supervision of the Financial System, the Pensions Commission and the CCSS. There is also a Non-Contributory Pension Regime, which has been operating since 1974, for people who require immediate economic protection and who do not qualify in any of the existing contributory regimes. It is managed by the CCSS (as of Dec, 2020 2020 the monthly amount of the non-contributory pension CRC 86,880, approx. US$140

(Last updated: December 2020)

Hong Kong (2000)

Law:
Mandatory Provident Fund Schemes Ordinance – MPF

Date Passed:
1995

Type of System:
Multipillar system comprising a non-contributory public system (first pillar) (National Provident Fund), which provides universal old age and full and permanent disability pensions, and a private pension system (Mandatory Provident Fund – MPF) (second pillar) with mandatory or optional enrolment (for those who earn less than USD 907 per month). Members can also make voluntary contributions (third pillar).

Startup Date:
December 2000

Managing Agencies:
MPF systems are managed by trusts, banks, insurance companies or asset managers.

Supervising Agency:
Mandatory Provident Funds Authority – Mandatory Provident Fund Schemes Authority – MPFA, an institution that operates in close collaboration with the Hong Kong Monetary Authority, the Securities and Futures Commission and the Insurance Authority, for overseeing the different intermediaries in the private pension system (www.mpfa.org.hk).

Enrollment:
Enrollment in the occupational defined contribution schemes is mandatory for workers between 18 and 65 working part-time (employed for more than 60 days) or full time. Informal workers in the food or construction industries, employed on a daily basis for less than 60 days, must also enroll in an MPF scheme.

Contributions/Assignments:
The total contribution rate is 10%, with the employer and worker each contributing 5%, for up to a monthly salary of HKD 20,000 (approx. USD 2,567). Contribution is optional for workers with incomes of less than HKD 7,100 per month (approx. USD 911). However, employers must pay in the 5% contribution, regardless of the worker’s decision. Self-employed workers must contribute 5% of their gross income. Casual workers make fixed contributions, based on a contribution table, like employers. The MPF system is designed to generate a replacement rate of 30% to 40%. The retirement age is 65 for men and women; early retirement is possible after 60 years of age. The MPFs that the contributions are paid into must be constituted as trusts, with trustees approved by the Mandatory Provident Funds Authority. Schemes can take three forms: (i) Master trust schemes, in which membership is open to the employees of more than one company, and autonomous or self-employed workers; (ii) schemes sponsored by the employer, in which membership is limited to employees of a single employer and its associated companies; (iii) industrial schemes for the workers of certain industries.

Pensions/Benefits:
Since these are defined-contribution plans, the pension benefit in the MPF plans consists of the accumulated sum of worker and employer contributions. The legislation does not stipulate whether it should be received as temporary income or as a life annuity (benefits are paid in a lump sum). In cases of inability to work prior to retirement age, the total sum accumulated until that time is the value of the benefit (lump sum).

State Guarantee
State guarantees provide coverage to those at an advanced old age, normal old age, and with disability. The pensions of the retirement program are granted to two age groups: those between 65 and 69 (normal old age) and those over 70 (advanced old age).

(Last update: December 2020).

Latvia (2001)

Bulgaria (2002)

Law:
Mandatory Supplementary Pension Insurance Law.

Date Passed:
2000

Type of System: Multipillar system comprising a non-contributory public system; a public PAYGO social security system managed by the National Social Security Institute (first pillar); a mandatory private contribution system (second pillar) comprising an individually funded savings scheme consisting of two funds: the Universal Pension Fund (FPU) and the Occupational Pension Fund (FPO); and a complementary voluntary system managed by the fund managers (third pillar).

Startup Date:
2002

Managing Agencies:
National Social Security Institute – first pillar

Private Pension Provision Companies – second and third pillars.

Supervising Agency: Financial Supervision Commission (FSC, www.fsc.bg).

Membership: Enrollment in the FPU is mandatory for all workers born after December 31, 1959. Enrolment in the FPO is mandatory for people entitled to early retirement due to heavy-duty work. Note: A law was passed in December 2014, which states that: (i) All new participants in the labor market will have to pay contributions to the first pillar, unless they state that they want their contribution (5%) to be managed by a private fund, for which they will have one year after starting their job (if they have not exercised their option to contribute to a private fund by the end of the year, they will no longer be able to enroll in Pilar II and will only be able to contribute to the First Pillar); (ii) Individuals currently contributing to the Second Pillar (those born after December 31, 1959), will have the one-off option of choosing whether they want to transfer their private pension fund to the solidarity fund of the National Social Security Institute (NSSI); contributors to the Second Pillar who choose to switch their contributions to the First Pillar may retract their decision, since the money from their accounts will be paid into a sovereign stability account instead of going directly to the First Pillar, which enables contributors to maintain ownership of their accumulated fund and eventually return its management to a private fund manager.

Contributions/Assignments: The FPU contribution rate is 5% (the employer contributes 2.8 percentage points and the worker 2.2 percentage points; 4.45 percentage points go to the individual account and the management commission is 0.25 percentage points. The FPO contribution rate depends on the member’s work category (harsh and unhealthy working conditions), so it varies between 7% and 12%; in the FPO, only the employer contributes.

The contribution rate to the PAYGO system is 27.3% (8% for health insurance, 14.8% for pensions, 3.5% for general illness and maternity, 1% for unemployment) for workers born after December 31, 1959 and 32.3% (8% for health insurance, 19.8% for pensions, 3.5% for general illness and maternity, 1% for unemployment) for those born before January 1, 1960. Employers are also obligated to make an additional Social Security contribution to the Fund for Work Accidents and Occupational Diseases, within a range of 0.4% to 1.1%. The exact amount depends of the main economic activity groups adopted in Bulgaria.

Pensions/ Benefits: The Mandatory Universal Pension Fund (FPU) must assure the insured a retirement life annuity, also granting a lump sum amount, or deferred gradual amounts from an accumulated pension fund, if permanent disability is declared, and a lump-sum payment or deferred amounts to the heirs of the deceased insured.

Mandatory Occupational Pension Fund (FPO) pensions are similar to those of the FPU, but with some nuances. For example, declared disability must be more than 70.99% to qualify for the disability benefit. The FPU and FPO both pay heirs – spouse, ascendants and descendants – the accumulated value of the fund in a lump-sum or deferred payment.

State Guarantee: The State guarantees a minimum pension; to access a pension, one must have completed at least 15 years of contributions before the age of 65.

The State also guarantees a non-contributory social pension to people aged 70 for more.

(Last updated: December 2020)

Croatia (2002)

Law:
Mandatory and Voluntary Pension Funds Law.

Date Passed:
1999

Type of System:
Multipillar system comprising a public system (first pillar) and a mandatory mixed contributory system (second pillar) in which the public PAYGO system complements the private Individually Funded Savings System. People can also make voluntary contributions (third pillar).

Startup Date:
The second pillar began operating in January 2002, complementing the public PAYGO program.

Managing Agencies:
Pension Fund Managers

Supervising Agency:
Croatian Financial Services Supervisory Agency (www.hanfa.hr).

Enrollment:
All individuals under 40 on January 1, 2002, who had social security coverage and entered the labor force after that date. People aged 40 to 50 who already had social security insurance, could voluntarily enroll in the individually funded system by June 30, 2002. From October 15, 2011, they could opt out of the individually funded system if the pension of the PAYGO system was more favorable than the one offered by the individually funded system.

Contributions/Assignments:
Workers in the former simple PAYGO system contribute 20% of their gross salary. The tax ceiling is HRK 55,086 (approx. USD 8,955). Those enrolled in the mandatory individually funded account system must contribute 5% to their individual accounts, and the remaining 15% to the simple PAYGO system. Initially, 10% of contributions were to be redirected to the individual accounts pillar, but the amount was reduced to 5% due to fiscal concerns. The employer does not pay any contributions.

Pensions/Benefits:
On retirement, the capital accumulated in the individual account must be used to purchase a life annuity from a licensed insurance company. If members are married on retirement, they can opt for a joint survival income (only if the spouses have accumulated their savings in the mandatory pension scheme).

State Guarantee
The State grants minimum and maximum pensions. The minimum pension is HRK 69.42 (approx. USD 11.28) for each year of contribution.

(Last updated: December 2020)

Estonia (2002)

Estonia (2002)

Law: Pension Insurance Law.

Date passed: 1998 (third voluntary pillar); 2002 (second mandatory individual accounts pillar).

Type of System: Multipillar system comprising a public system (first pillar) and a mandatory mixed contributory system (second pillar) in which the public PAYGO system complements the private Individually Funded Savings System; and a voluntary private complementary system (third pillar).

* Note: the public PAYGO system (first pillar) comprises two types of pensions: (i) a fixed-rate non-contributory minimum pension of EUR 205.21 in 2019 (Flat Rate National Pension), which is paid to all residents of Estonia aged (increasing by 3 months per year), who have not contributed for a sufficient period of time to access a full State old-age pension (15 years), or who have been permanent residents of Estonia, or have resided in Estonia for at least five years immediately prior to submitting their application for a pension; (ii) a full old-age pension based on the number of years of contribution (at least 15 years to obtain the minimum pension). (Source: https://www.ssa.gov/policy/docs/progdesc/ssptw/2018-2019/europe/estonia.html y http://www.iopsweb.org/resources/44962360.pdf)

Startup Date: The second individual accounts pillar began operating in 2002.

Administrative Agencies: Companies specializing in pension fund management.

Supervisory Agency: Financial Oversight Authority (www.fi.ee).

Enrollment: Enrollment in the individually funded savings system is mandatory for workers born after December 31, 1982. People born between 1942 and 1982 may decide to remain in the public system or enroll in the individually funded accounts system. The decision is irreversible.

Contributions/Assignments: In the mixed contributory system (second pillar), contributions are paid into the individually funded and PAYGO systems. Contributions are paid into the individual account by the worker (2% of gross salary) and the employer (4% of gross salary); i.e., in total, 6% of gross salary is accumulated in the second pillar individual account. The contribution to the PAYGO system, in turn, is 16% of the worker’s gross salary, fully financed by the employer.

Pensions/Benefits: Pensions are paid in life annuities.

State Guarantee: To receive the minimum pension, people must have an employment history of at least 15 years. The retirement age for men and women increased by three months per year as of 2017, to reach 65 by 2026.

(Last updated: December 2020)

Kosovo (2002)

Dominican Republic (2003)

Law: Law 87-01 that created the Dominican Social Security System, which includes coverage in three types of insurance: Old Age, Disability and Survival Insurance (pensions), Family Health Insurance and Occupational Risk Insurance.

Date Passed: May 2001

Type of System: Multipillar system comprising a non-contributory public system (first pillar) and a mandatory, private, individually funded savings system (second pillar), in which only private sector workers were enrolled in what was the Dominican Social Security Institute (IDSS). There are also special pension programs for certain segments of workers. The new social security system is made up of three regimes: Contributory, Subsidized Contributory and Subsidized Regime.

Startup Date: 2003.

Managing Agencies: Pension Fund Managers (AFPs).

Supervising Agency: The Pensions Commission (SIPEN, www.sipen.gov.do).

Enrollment: The enrollment of dependent and self-employed workers in the system is mandatory, exclusive and permanent. Dependent public and private sector workers are enrolled in the Contributory regime; self-employed workers with incomes equal to or higher than the national minimum wage, are enrolled in the Contributory-Subsidized Regime; and self-employed workers with unstable incomes below the national minimum wage, as well as the indigent and disabled, are enrolled in the subsidized regime.

Contributions/Assignments: Social security contributions are currently 9.97% of salary. Of that total, 8.4% is paid into members’ individual accounts; a maximum of 1% is paid to the Life and Survival Insurance Company; 0.4% to the Social Solidarity Fund; and 0.07% to finance the operation of the Pensions Commission.

Pensions/Benefits: The system grants old age, total or partial disability, unemployment due to advanced old age and survival pensions.

State Guarantee: The Dominican government guarantees all members the right to a minimum pension. The Minimum Guaranteed Pension (PMG) of the contributory system, pursuant to law, is 100% of the lowest statutory minimum wage, and is funded by the Social Solidarity Fund. Nonetheless, no PMG payments have yet been made, since the contributory system has only recently been launched. There is also a Solidarity Pension for members of the subsidized regime, which according to Art. 65 of Law 87-01, is equivalent to 60% of the minimum public wage.

(Last update: December 2020).

Russian Federation (2003)

Law: Federal Law on “Non-State Pension Funds (NPF)”

Date Passed: May 1998.

Type of System: Multipillar, comprising a non-contributory public system (first pillar; basic state pension); a mandatory mixed contributory system (second pillar) in which the Notional Defined Contribution program (NDC) is complemented with the Individually Funded Program; a complementary private and voluntary system offered by life insurers and Non-State Pension Funds (third pillar).

Startup Date: 2003.

Managing Agencies: Non-State Pension Funds (NPF); State Pension Administrator (VEB).

Supervising Entity: Federal Financial Market Service (www.ffms.ru).

All workers born in 1967, or after, have the right to choose whether their contributions will be paid into a Non-State Pension Fund (NPF; second pillar; privately-managed individual accounts) and jointly to the Notional Defined Contribution Program managed by the State Administrator “Vnesheconombank” (VEB – Pension Fund of the Russian Federation, PFR). From 2015 onwards, workers born after 1967 can opt out of the NPF and only contribute to the NDC program (workers born in 1966 or earlier cannot participate in the NPF). Every year, workers born in 1967, or after, have 3 options regarding their choice of individually funded systems: (i) maintain their contributions invested and managed in one of the NPFs; (ii) keep their funds in the PFR, managed by VEB; (iii) keep their funds in the PFR, managed by a private management company (this company is selected in a bidding process and has an agreement with the PFR for the management of pension savings). (Source: http://www.oecd.org/pensions/RussaFundedPensionSystem2013.pdf; http://www.pfrf.ru/en/pens_system/how_formed/).

Contributions/Assignments: Contributions to the system are paid in by the employer by means of a uniform social security tax of 22% of the gross salary of the worker: If a worker born in 1967 or after, chooses to enroll in the individually funded program (second pillar, privately-managed individual accounts), then 6 percentage points of the total contribution rate are redirected to the chosen NPF (or to EBV; or a private management company) and the remaining 16 percentage points will go to the NDC Program (second pillar, notional accounts managed by VEB).

Pensions/Benefits: The second pillar benefits can be paid as a lump sum, or the ‘term pension payment’ mode. In the latter case, the duration of payment is chosen by the beneficiary, but cannot be less than 10 years. (Source: http://www.pfrf.ru/en/pens_system/how_formed/)

(Last updated: December 2020)

India (2004)

Law: The New Pension System (NPS) Law

Date Passed: 2003

Type of System: Multipillar, comprising three pillars:

(1) A non-contributory first pillar (National Old Age Pension, NOAP), which has been operating since 1995, and provides a monthly pension of INR 200 (approx. USD 3) to all people over 65 below the poverty line.

(2) A second contributory pillar comprising the following programs:

(i) For public sector workers prior to January 1, 2004: (a) A defined-benefits PAYGO Pension System for Central Government Public Servants (Central Civil Services Pension Scheme, CSFS), operating since 1972; (b) General Provident Fund (GPF), operating since 1981.

(ii) It is mandatory for unionized and non-unionized public sector workers to enroll in these two programs (occupational pensions covering workers of 181 specific economic sectors, in companies with more than 20 workers), that have been operating since 1952: (a) Employees Provident Fund (EPF), defined contribution; (b) Employees’ Pension Scheme, (EPS).

ii) The New Pension System (NPS) is an individually-funded individual accounts system for Central Government Public Servants employed after January 1, 2004. It was approved in 2003, and started operating in 2004.

(3) A third private voluntary savings pillar (available to self-employed workers and workers in the organized productive sector). There is also the Pradhan Mantri Shram yogi Mandhan program, for workers with incomes below INR 15,000 (approximately US$ 210) in the non-unionized sector, between 18 and 40 years of age, in which the beneficiary will receive a minimum monthly income of INR 3,000 (approximately US$ 42) after turning 60, but requires contributions depending on the age of members when enrolling in the program. This program receives matching state contributions.

Start-up date: 2004 (commencement of NPS operations).

Managing Agencies: The Employees Provident Fund Organization (EPFO; www.epfindia.com/site_en/) is an Indian government agency established for the administration of the EPF and EPS. NPS managers must be the licensed asset managers.

Supervisory the: The Pension Fund Regulatory and Development Authority (PFRDA, www.pfrda.org.in).

Membership:

EPF / EPS: Workers employed part-time and by the day, with employment contracts for a minimum monthly wage of up to INR 15,000 (approx. USD 215), working in companies with at least 20 employees, in one of the 186 categories of the industry with coverage; workers in other types of activities specified by law, including cooperatives with more than 50 employees;

NPS: mandatory for all public servants employed after January 1, 2004.

Contributions/Assignments:

EPF/EPS: Workers contribute 12% of salary to the EPF; employers contribute 3.67% of the worker’s gross salary to the EPF and 8.33% to the EPS; the State contributes 1.16%. The amount accumulated in the EPF balance receives interest at a specific rate, which is announced and updated by the Government;

NPS: The contribution is bipartite and amounts to 20% of the worker’s gross salary; workers and employers both contribute 10%.

Pensions/Benefits:

EPF: Partial withdrawals are allowed for specific expenses such as construction, education, marriage, illness, etc. A one-off lump sum withdrawal is allowed on reaching retirement age;

EPS: One third of the accumulated fund can be withdrawn as a lump sum;

NPS: This system will have Level I and Level II individual accounts; Level 1 accounts are mandatory for public servants, without the possibility of early withdrawal of funds; Level II accounts are voluntary, and savings can be withdrawn at any time (they do not have tax advantages).

(Last update: December 2020).

Lithuania (2004)

Law: Social Security Law (1944); Pension Funds (1999); Individually funded accounts (2002).

Date Passed: December 2002

Type of System: Multipillar Scheme comprising a first non-contributory pillar (social assistance); a second contributory pillar in which a PAYGO system and a private individual accounts saving system (voluntary election) are complemented; and a third pillar corresponding to a private voluntary complementary system.

Start-up: January 2004 (private individual accounts savings system)

Managing Agencies: The second pillar is managed by Pension Fund Managers or Life Insurance Companies.

The third pillar is managed by the Pension Fund Managers.

Supervisory Agency: Unified supervision by the Central Bank of Lithuania (www.lb.lt).

Membership:

All employees are free to participate in the individually funded system and start saving in private funds, or remain in the PAYGO system (State Social Security Fund). Once workers choose to enrolled in the individual accounts program, they cannot opt out.

Contributions/Assignments:

The workers’ contribution rate to social security (from January 2020 to December 2020) is 19.5% (8.72% to pensions; 6.98% to health insurance; 2.09% to health insurance and 1.71% to maternity insurance) with an additional voluntary transfer to the individually funded pension funds of 2.1% (increasing to 3% as of 2023). The employer contributes 1.77%.

(Source: : https://www.oecd-ilibrary.org/sites/83a87978-en/1/3/2/22/index.html?itemId=/content/publication/83a87978-en&_csp_=3445743d6909dcc02824b5f0a2e07895&itemIGO=oecd&itemContentType=book#section-d1e173199 and https://leinonen.eu/lt-en/news/salary-taxation-changes-from-2020)

Pensions/Benefits: On retirement, pension fund members must use their accumulated assets to purchase a life annuity provided by a pension fund manager. Both lump sum and programmed withdrawals are possible, only if the amount remaining in the member’s account is sufficient to purchase an annuity equivalent to the basic state-guaranteed pension.

State guarantee

There is a non-contributory basic pension that is paid subject to means testing, to all those who have turned 64 (men; increasing to 65 as of 2026) and 62 years and 8 months (women, increasing to 65 as of 2026).

(Last update: December 2020).

Nigeria (2005)

Taiwan (2005)

Law: New Labor Pension Act (2004), whereby employers must contribute 6% of workers’ salaries into individual pension accounts managed by the Labor Insurance Office.

Date Passed: 2004

Type of System: Multipillar system comprising a first public pillar that includes the National Pension Program for those who are not covered by any other program, and the Labor Insurance Program; a second pillar including the Labor Pension Fund, of mandatory individual accounts; and a third voluntary contributions pillar, with tax benefits (Source: https://www.bli.gov.tw/en/0010366.html)

Start-up date: 2005

Managing Agency: Labor Insurance Office (www.blf.gov.tw).

Supervising Agency: Labor Funds Supervisory Committee (https://english.mol.gov.tw/6386/6418/6422/6507/)

Membership: The new system (individual accounts) is mandatory for all new members entering the workforce and workers who changed employers after July 1, 2005. It is voluntary for workers who entered the workforce before 2005. Those who did not opt for any system before 2010, remain in the old system.

Contributions/Assignments: Employers contribute 6% of workers’ monthly salaries; workers can contribute up to 6% of their salaries on top of that, with tax benefits.

Pensions/Benefits: Workers can opt for a monthly payment or a lump sum if their length of service is equal to or greater than 15 years. They can only opt for a lump sum if their length of service is less than 15 years.

The system grants old-age and survival pension benefits. The pension is calculated as: Accumulated principal + accrued dividends from the pension account.

State Guarantee: The National Pension Program pays a monthly pension that is 0.65% of the monthly insured amount multiplied by the number of years of coverage, plus NT$ 3,628 (130.5 USD), or 1.3% of the monthly insured amount multiplied by the number of years of coverage, whichever is greater.

The monthly insured amount is NT$ 18,282 (658 USD)

(Last update: December 2020).

Slovak Republic (2005)

Law: Old-Age Pension Savings Act

Date Passed: January 2004

Type of System: Multipillar, comprising a non-contributory public system (first pillar); a mandatory mixed contributory system (second pillar) in which the public PAYGO system is complemented with the Individually Funded Savings System (private); and a voluntary private complementary system managed by the pension funds, or life insurance companies (third pillar).

Startup Date: January 2006

Managing Agencies: Contributions to individually funded accounts are managed by Pension Asset Management Companies (PAMCs).

Supervising Agency: Unified supervision by the National Bank of Slovakia (NBS, www.nbs.sk).

Enrollment: The new pension system is mandatory for all workers who were not enrolled in the PAYGO system before the law came into effect (2005). Workers under the age of 51 were automatically enrolled in the new system; those aged 52 or more, who had been enrolled in the PAYGO system prior to the passing of the law, could choose between remaining in the PAYGO system, or enrolling in the new system by June 2006. However, as of January 1, 2013, enrollment in the individual account program is voluntary for new members of the workforce (this decision must be made before age 35, and cannot be reversed).

Contributions/Assignments: The employers’ contribution to the old-age insurance is 14% of the gross salaries of workers. If the worker is contributing to the individually funded program, 5 percentage points of this rate (financed by the employer) go to the worker’s individual account and 8 points go to the public PAYGO system. The contribution to the individual account increases by 0.25 points per year (up to 6% as of 2024). If the worker does not enroll in the individual accounts program, the entire 14% goes to the PAYGO program. Furthermore, workers’ contributions to the old-age insurance are 4% of salary, which goes entirely to the PAYGO program. These contributions are collected by the Social Security Agency (SIA).

Pensions/Benefits: The individually funded savings system has several pension modes, ranging from early pensions to survival and programmed retirement pensions. The PAYGO system also grants pensions “in favor of the spouse,” for married women who are totally disabled, or who have turned 65, in the event of divorce or the death of their husbands. In also grants total and partial disability and widowhood pensions.

State Guarantee: The government grants a minimum pension after a minimum period of employment of 30 years, with partial pensions being provided for shorter periods of employment.

(Last update: December 2020).

What are you searching?

FIAP ?>

Watch again the presentations of the FIAP Seminar 2021

Download the presentations of the speakers at the FIAP Seminar 2021

Pension Systems Reform

Countries that have introduced a mandatory individually-funded pension program

Featured Content

The early withdrawal of funds aggravates the pension problem and affects the neediest through higher inflation and in...

Level of managed funds and contributors in Latin America’s mandatory individually-funded systems at the end of Decemb...

Why 15 thousand people rallied to defend their pension funds

Videos

Latest publications and studies of interest

Pension Note No.63

Pension Note No.62

Pension Note No.61

Progress of the Pension Systems No- 1

Pension Notes - No. 60, February 2022

FIAP's Books

Pension Reforms: Addressing Needs in a Changing World

The Challenges of Aging and Technological Change on Social Security

The Role of Defined Contribution Programs to Pensions: Challenges and Proposals

Opportunities and Challeges in the Investment of Pension Funds and Voluntary Pension Savings Funds

Multi-Pillar Pension Systems: Investing in the Future

Reinforcing the Foundations of the Individually-Funded Pension System to Ensure its Sustainability

Individual Savings: Better Pensions plus Economic Development

Opportunities and Challenges for Individually-Funded Systems in a Globalised World

Advancing in the Strengthening and Consolidation of the Individually-Funded Pension Systems

Developing the Potential of the Individually Funded Systems

Pension Systems' Reforms