FIAP

Chile (1981)

Law:
Decree Law 3.500

Date of Enactment:
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/ voluntary pillar).

Startup Date:
May 1981.

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

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

Membership:
Enrollment is mandatory for all new dependent workers entering the labor market for the first time after January 1, 1983. All self-employed workers who issue fee vouchers or receive vouchers for third-party services (contributions are mandatory from 2018 onwards, materializing in the 2019 Income Tax Declaration process), which will incorporate all these workers into the system.  Since 2009, new members must enroll in the AFP that wins a bidding process based on price, and remain in that AFP for a maximum of 24 months (older members can switch fund managers freely).

Mandatory and Voluntary Contributions:
Contributions are a percentage of the salary or income of members, with a tax ceiling of 80.2 Unidades de Fomento (USD 3,049 in Dec. 2019). The contribution rate is 12.77% (of which 10 points goes to the member’s individually-funded account, plus a commission on income determined by each Fund Manager, destined to its financing, also including the disability and survival insurance premium). Employers must finance the part of the commission destined to financing the insurance, and workers must finance the part of the commission charged by the AFP. To December 2019, the commission charged by the AFPs fluctuates between 0.69% and 1.45% of income, with a weighted average per number of contributors of 1.24%. To the same date, the disability and survival insurance premium (financed by the employer in the case of dependent workers, and financed by the worker in the case of self-employees)  was 1.53% for all the AFPs.

Pension Modes:
This system provides the disability, survival and old age pension benefits (at the legal retirement age, or early retirement). The legal retirement age is 60 for women and 65 for men. There are 4 pension modes: Programmed Withdrawal (RP); Life Annuity (RV); Temporary Income (RT) with Deferred Life Annuity (RTRV); and Programmed Withdrawal with Immediate Life Annuity (RPRV). Members can choose freely between them, but the life annuity must be equal to or greater than the basic solidarity old-age pension; the deferred life annuity cannot be less than 50% or more than 100% of the first Temporary Income payment; freely disposable surpluses exceeding the balance needed for financing a reference pension can be withdrawn in the different pension modes.

State Guarantee:
The State guarantees a minimum pension to people with 20 years of contributions who cannot finance a pension with the amount accumulated in their individually funded accounts. Members who initially opted for switching to the new system are entitled to receive the Recognition Bond, an instrument issued by the State, for the amount of the recorded contributions paid into the former pension system. To qualify for this bonus, members must have contributed for at least 12 months to the former pension system, between November 1975 and October 1980. The State also provides an old age and disability solidarity pension system (Basic Solidarity Pension, PBS, and Solidarity Pension Contribution, APS) for members of families comprising the poorest 60% of the population and not entitled to a pension in any pension system, either as the direct beneficiary or the beneficiary of a survival pension. Note: The solidarity pension system replaces the State-Guaranteed Minimum Pension Program (PMGE); people receiving old-age or disability PMGE to July 1, 2008, will continue receiving that guaranteed pension. However, they can opt to switch to the solidarity pension system at any time, in accordance with the applicable rules. This option can be exercised only once.

(Last update: December 2019)

Australia (1992)

Law:
Superannuation Guarantee (Administration) Act, 1992.

Date Passed:
January, 1992

Type of System:
Multi-pillar 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 corporate funds; Small pension Small APRA Funds (SAFs); Retail Funds], to be managed by trusts. The exception to the above are the corporate funds of the public sector. 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, operations and investments of the pension fund.

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

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

Mandatory and Voluntary Contributions:
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 from 2021, to reach 12% in 2025), and can make additional voluntary contributions. Employees can also make voluntary contributions to the fund on their behalf, as stipulated by each fund.

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

State Guarantee:
A universal non-contributory pension is guaranteed to low-income individuals over the age of 65 (“Age Pension”).

(Last update: December 2019)

Peru (1993)

Law:
Law 25.897.

Date Passed:
December 6, 1992.

Type of System:
Multipillar system comprising a non-contributory public system (first pillar, Pension 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 (RAIS). People can also engage in voluntary pension savings (third pillar).

Startup Date:
June 1993

Managing Agencies:
In the private system, the pension funds are managed by the AFPs.

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

Supervising Agency:
Private system: Superintendency of Banks, 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.

Mandatory and Voluntary Contributions:
The average contribution of workers to the private system remaining in the “Commission on Income” system, to 31.12.2019, is 12.95% of taxable income, of which 10% goes to the individually-funded account and the rest is distributed between the Insurance Company (financing of the disability and survival insurance – 1.35%) and the AFP (1.60%).

Contribution to the PAYGO system is 13%.

Contributions to the pension systems are not deductible for income tax purposes.

Benefits:
The private system grants 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 RV the return and longevity risks are transferred to the insurance company, but the pensioner loses ownership of the funds. In RVF the pensioner takes out a life annuity with an AFP until the time of his death, assigning the balance of the account to the AFP. RTRVD is a combination of RV and RP. RVD cannot be less than 50% of the first monthly payment of the RT, or greater than 100% of such payment. Pensioners can receive their benefits in indexed new soles, in dollars or in both currencies in the RVF mode. In Combined Income, two pensions are taken out simultaneously: an RV in new soles and an RP ( this can only be chosen if RV is equivalent to the value of the state guaranteed minimum pension). In Mixed-Income, two pensions are taken out simultaneously: an RV in dollars contracted with an insurance company, and an RP in new soles ( can only be taken out if the RV is equivalent to the value of the state guaranteed minimum pension). In Dual Currency Income, two life annuities are taken out simultaneously, one in new soles and the other one in dollars. Note: On June 29, 2016, a law was published stating that, at any time of affiliation, the member may use 25% of their accumulated funds to: (a) pay the initial fee for the purchase of a first property , provided it is a mortgage loan granted by an entity of the financial system; or (b) amortize a mortgage loan used to purchase a first property granted by a financial institution. In addition, the law states that: (i) the affiliate, from 65 years of age, may choose between receiving the corresponding pension in any form of retirement or requesting the AFP to deliver up to 95.5% of the total of the fund available in the individual account (in the installments that the member wishes); (ii) the affiliate exercising the option to withdraw the funds will not be entitled to any state guarantee benefit; (iii) the remaining 4.5% of the Individual Account must be retained and transferred by the AFP directly to EsSalud (for health coverage); (iv) the foregoing applies to members of the Special Regime for Early Retirement and to retirees for Programmed Withdrawal.

State Guarantee:
The State only began to guarantee a minimum pension in 2002. An item has been assigned to the Recognition Bond in the National Budget of the Republic. However, the National Standardization Board delays proceedings seeking to generate savings for the State, jeopardizing the retirement of some workers. The State also pays a non-contributory pension (“Pension 65” Program) of PEN 125 (approx. USD 38) monthly, from 65 years old, to those in conditions of extreme poverty who are not enrolled in or receiving a pension from any social security system.

(Last update: December 2019)

Colombia (1994)

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

Date of Enactment:
December 1993

Type of System:
Multipilar system comprising a non-contributory public system (first pillar); 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).

Start of operations:
1994

Management Agencies:
The Pension Fund Managers (AFPs) manage the individual accounts in the individually funded savings system. The public defined-benefit Average Premium Plan is managed by Colpensiones, a State agency comprising all solvent public agencies prior to the reform.

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

Membership:
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 when they are 10 years or less from the official retirement age.

Mandatory and Voluntary Contributions:
The contribution rate to the Individually Funded Savings System by dependent workers is 16% of the monthly taxable base salary, 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 (1.03% average at 31.12.2019) and the Fund Manager’s management commission (1.97% average at 31.12.2019); 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 the same 16%, but distribution varies slightly; 13% goes to a common fund, and the remaining 3% is the Fund Manager’s commission. 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.

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). The family pension, which enables adding the contributions of spouses or partners to meet pension requirements, was included in 2012. Pensions cannot be less than one minimum wage, which is similar to the average income of employed individuals. Pensions between 10 and 20 legal minimum monthly wages must contribute 1% to the Solidarity Pension Fund, and those exceeding 20 times the minimum wage must contribute 2%.

State Guarantee:
There is a Minimum Pension Guarantee (GPM) for members of the RAIS (private) whose balances are insufficient for financing this pension and meeting the eligibility requirements. The GPM is paid in first instance with the savings of the pensioner, and when this is exhausted, the Minimum Pension Guarantee Fund pays. There is also a Solidarity Pillar (Senior Citizen Social Protection Program) for the low-income population over 65, which consists in a monetary allowance every two months. There are also the BEPS, an alternative old age pension savings mechanism in individual accounts, managed by Colpensiones, separately from the General Pension System. It enables adding the balances saved in the SGP and the BEPS account to provide a monthly income below the minimum wage. This is aimed at all individuals who have neither the capital nor the weeks of contribution for retirement, but who must also be categorized as part of the vulnerable population (based on SISBEN’s social policy means-testing tool). The Government also offers a 20% savings subsidy. Depending on the level and consistency of savings, members receive the benefits of disability and death micro-insurance as well as financial assistance for funeral expenses. The BEPS are not transferable or inheritable.

(Last update: December 2019)

Uruguay (1996)

Law:
Law 16.713

Date Passed:
September 3, 1995

Type of System:
Multipillar or mixed system, comprising a defined benefit public contributory system and a mandatory defined-contribution individual savings system with derived benefits, in which the Intergenerational Solidarity Pension System (public PAYGO) and the Individual Savings System (individually funded) are integrated. People may also make voluntary contributions to the Savings System. Enrollment in the system is based on three salary levels and the option of Article 8 (Law 16.713):

1) For individuals with nominal salaries below Nominal Income Level 1 (approx. US$ 1,550 at Dec. 2019) who have marked the option of Article 8, the contribution is divided into 50% for the PAYGO system and 50% for the individually-funded system. In this case, the calculation is performed as follows: first of all, the total pension contribution is calculated (15% of the nominal wage), and that result is divided in two; 50% remains in BPS and the other 50% is transferred to an AFAP. If the worker did not choose Article 8, all contributions must be paid into the PAYGO system (contribution to the individually-funded system = 0).

2) When an individual earns a salary between Level 1 and Level 2 (approx. USD 2,325 at 31.12.2019) and has marked the option of Article 8, 50% of the contribution corresponding to income up to Level 1 goes to the individually-funded system and the rest of the contribution goes to the PAYGO system. If the worker did not opt for Article 8, he will contribute 50% of his income up to Level 1 (approx. USD 1,550) to the PAYGO system and 15% of the amount exceeding Level 1 and up to Level 2 (approx. USD 2,325) to the individually funded system.

3) When the salary falls within Level 2 and Level 3 (approx. USD 4,649 at 31.12.2019), the distribution varies: the part of the contribution corresponding to Level 1 goes to the PAYGO system, and the rest of the contribution goes to the individually-funded system. In cases in which the worker’s nominal salary exceeds Level 3, the discount is applied only up to Level 3; the rest of the money is not subject to contributions and is assigned to the worker’s liquid wages. In the case of Level 3 salaries, the contribution corresponding to Level 1 goes to the PAYGO system and the contribution on income between Levels 1 and 3 goes to the AFAP.

Startup Date:
April 1, 1996.

Managing Agencies:
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 manages 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 system.

Enrollment:
The law stipulates that all workers whose nominal salary exceeds Level 1 (approx. USD 1,550 on 31/12/2019) and who were under 40 years of age on 1 April 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 the worker does not choose an AFAP, BPS assigns one by default. 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.

Mandatory and Voluntary Contributions:
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”).

Benefits:
The individual savings system grants old age, disability and survival benefits. Old-age benefits are determined on the basis of the capital accumulated in the individual account, the interest rates paid by the insurance company on that capital and the life expectancy of the member. The new system does not consider 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 benefits received by the worker depend on the balance accumulated in the individually-funded account (at retirement), age (at retirement), and the gender of the worker.

The State guarantees an old age and disability pension (Noncontributory Old Age and Disability Pension Program (PNC) – first pillar) for those individuals who are 70 years old and lack the resource for providing for their vital needs, or who are absolutely and permanently disabled for all paid work. This pension is for an amount of USD 299 per month (data updated at 31.12.2019).

(Last update: December 2019)

Bolivia (1997)

Law:
Law 1.732

Date of Enactment:
November 1996

Type of System:
Multi – pillar scheme made up of a non-contributory public system (first pillar) and a mandatory private contributory system based on savings and capitalization (second pillar), which totally replaced the public pay-as-you-go system. People may also pay voluntary contributions (third pillar)

Start of operations:
Year 1997

Management Institutions:
The 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 previously managed the pension funds.  The Law, in turn, establishes a new state agency, the Public Long-Term Social Security Manager (GSS) within the Ministry of Economy and Public Finances, which will be entrusted with managing the funds.  The AFPs are still operating, since there is a transition period.  When this period ends, the GSS will start fully operating.

Supervisory Institution:
Pensions and Insurance Supervision and Control Authority (www.aps.gob.bo).

Membership:
Enrolment in the new system is mandatory for employed workers while the self-employed may join voluntarily.

Contributions / Payments:
The contribution consists of a payment by the worker (12.21% of his/her gross salary) of which 10% is deposited in the individual capitalization account, 1.71% is used to cover the insurance premium for common risk and 0.5% to finance the administration costs of the AFPs. There is also an additional payment made by the employer (1.71%) to pay the insurance premium for illness or accidents leading to disability or death under the heading of accupational risk.

Benefits / Services:
The retirement pension is based on the individual fund that has been accumulated, and its value is used to buy a life-long insurance (life annuity) or a so-called life-long variable monthly payment contract. These contracts can provide for the payment of a life pension.

State Guarantee:
Although the government does not guarantee a minimum pension, it does intend to pay the “Dignity Income” or ” Universal Old-Age Income,” amounting to BOB 300 (approx. USD 44) for the elderly with non-contributory pensions, and BOB 350 (approx. USD 51) to the elderly with contributory pensions.

(Latest update: December 2019)

China (1997)

Law:
Urban Pension System Law.

Date Passed:
Year 1996

Type of System:
Multipillar system comprising a first non-contributory pillar that offers a basic social pension denominated “Rural Social Pension” (funded with general taxes, for people in the rural sector, since 2009); a second mandatory contributory pillar for workers in the urban sector, which has been operating since 1997, in which two programs complement one another: (i) PAYGO program, financed with employers’ contributions (20% of the salaries of workers);  (ii) individually funded program, financed with the contributions of workers (8% of salary); and a third individual accounts voluntary occupational pension savings pillar (Enterprise Annuities System, operating since 2004).

Startup Date:
January, 1997

Managing Agencies:
The law requires the individually funded portion of the second pillar pension funds to be managed by trusts.

Supervising Agency:
Unified supervision by the China Insurance Regulatory Commission (CIRC, www.circ.gov.cn).

Enrollment:
Enrollment in the second  pillar is mandatory for all urban sector dependent workers.

Mandatory and Voluntary Contributions:
In the second mandatory pillar, urban sector companies must contribute 20% of their employees’ wages to finance the PAYGO program.  Urban sector workers contribute 8% of their salaries to individual accounts.

Benefits:
Workers can access their accumulated funds through a lump sum withdrawal or Programmed Withdrawal.

State Guarantee:
A universal non-contributory pension (“Rural Social Pension”) of at least CNY 88 (USD 12.4) per month is guaranteed  to workers in the rural sector (this amount increases with age in some sectors).

(Last update: December 2019)

Mexico (1997)

Law:
Social Security Law – LSS97 (IMSS Workers) / Social Security Institute and Social Services of Government Workers Law – LISSSTE (ISSSTE Workers).

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

Type of System:
Multipillar system comprising a contributory system managed by private companies, denominated Pension Fund Managers (AFOREs), which completely replaced the public PAYGO system. Members can also make short and long term voluntary contributions (third pillar).

Startup 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, www.consar.gob.mx).

Enrollment:
All individuals who entered the labor market after July 1, 1997, must enroll in an Afore of their choice. Workers have the option of choosing from among the Pension Fund Managers (Afores) where their resources will be invested in accordance with their age, profiles and investment preferences. They will be assigned to a Siefore (Pension Fund Investment Company) according to their age. Workers who contributed to the former PAYGO pension system until June 30, 1997, are entitled to the benefits granted by that system, which has different benefits and waiting periods. Workers who contributed to both systems can choose between the former PAYGO system and the new individually funded system, whichever suits them best.

Mandatory and Voluntary Contributions:
IMSS workers – The total contribution rate for the retirement, unemployment at an advanced age, and old age subaccount (RCV) is 6.5% of the worker’s wages, paid in jointly by the worker (1.125%), the employer (5.15%) and the State (0.225%). The Social Contribution is also paid into each individual account by the State. It progressively drops from approximately 5.7% for one minimum wage, to 0.4% for the ceiling of 15 times the called Unidades de Medida y Actualización (UMAS, Unit of Measure
and Update”), for each day of work, updated in accordance with the table contained in Article 168, paragraph IV of the Social Security Law reformed in 2009. If a worker with 5 times the “Unit of Measure and Update” is taken into consideration, this Social Contribution is 1.121% of the salary as of December 2019. Then, the total contribution of the State for the individual capitalization account (old age) is 0.225 % + 1.121% = 1.433%. The Disability and Survival Insurance (2.5%) is administered by the Mexican Institute of Social Security (IMSS) where workers must contribute 0.625% of their wage and companies 1.75% of wages and the State 0.125%. Then, the total contribution to the pension system in this case is 1.75% the worker, 6.9% the employer, and 1.588% the State, thus totaling a total rate of 10.208%.

Benefits:
Due to the defined-contribution nature of the system, retirement benefits depend on contributions and the effect of the compound interest of the resources in the individual account. One can choose between purchasing a life annuity from an insurance company, or programmed withdrawal, through the Afores, which consists in regular drawdowns calculated on the basis of life expectancy and expected return. There are only two pension modes: Programmed Withdrawal and Life Annuity.

State Guarantee:
The State guarantees a minimum pension to workers who meet the requirements for retirement (1,250 weeks of contributions and 65 years of age), but have not accumulated sufficient resources to cover a pension equivalent to a general minimum wage for the Federal District. The Afore pays the pension against the individual account, until it is exhausted, and thereafter the federal government pays the pension. In addition, there is a program of social pensions financed by the State, called “Pension Program for Older Adults”, which grants MXN 637.5 (approximately USD 33.7) monthly, to all adults over 68 years throughout the country, and to adults over 65 years  who live in the municipalities that comprise indigenous people.

(Last update date: December 2019)

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). Enrolled 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).

Membership:
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). Workers who were over 36 years of age at the time, but under 55 in the case of men, and under 50 in the case of women, had the option of enrolling in the system or remaining in the public pension system.

Mandatory and Voluntary Contributions
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 so-called Individual Pensions Savings Account (CIAP) of the worker. Part of the 7.75% contributed by the employer is used for paying the AFPs commission and the disability and survival insurance premium (the sum of both of them is a maximum of 1.95% of salary in 2019; it will be 1.9% of salary en 2020); the average fee charged by pension fund managers al 31.12.2019 is 1.04%, and the disability and survival insurance premium is 0,91%); another part goes to the so-called Solidarity Guarantee Account (CGS), and another part to the worker’s CIAP.

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

The CIAP will always receive the worker’s 7.25% contribution. What will vary, as well as the amounts earmarked for the CGS, are the employer’s contributions. From 2017 to 2018, employers will deposit 0.75% in the ICPC, and 0.8% in 2019. The contribution will increase to 0.85% between 2020 and 2027, and to 1.35% between 2028 and 2037. From 2038 to 2043, the employer’s contribution to the ICPC will be 1.85% of the worker’s salary, 2.85% between 2044 and 2049, increasing to 3.85% as of 2050.

Benefits:
The benefits granted by the system include old age, common disability and common hazards survival pensions. There are 3 existing pension options: 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 USD 50 per month, for adults over 70 living in the 100 municipalities with the highest poverty rates in the country.

(Last update: December 2019)

Hungary (1998)

Law:
Law on Mandatory Pensions and Pension Funds, pursuant to Agreement LXXXII Governing the Establishment of Mandatory Private Pension Systems.

Date of Enactment:
July 1997

Type of System:
Multi – pillar scheme composed of a first pillar which is state managed: pay-as-you-go system. The participation in this system is mandatory for all insured people. The retirement age is 62 (by 2003) for men and 62 will be for women (by 2009). The second pillar, privately managed, fully funded, DC system without minimum benefit guarantees. The participation is mandatory for new employees (new entrants to the labour force). Institutions operated in this segment are mandatory (private) pension funds. Fund members pay 8% of their gross salary to the funds with an upper limit laid down in law. A person may join only one fund at the same time. The third pillar is privately managed, fully funded, DC system without minimum benefit guarantees. The participation is voluntary for members. Pension funds have the same institutional framework as funds in the secodn pillar. Fund members pay their personal savings to the funds, where the required minimum fee is set up in the funds regulation. Employers are encouraged to support their fund member employees by generous tax and social security allowances, meaning, employers are allowed to may pay the pension fund fee on behalf of their employees. The person has the legal right to join unlimited number of pension fund.

Start of operations:
January 1998

Management Institutions:
Private Pension Fund Managers

Supervisory Institution:
Hungarian Financial Supervision Authority (HFSA) supervises and licenses the mandatory second pillar and the voluntary third pillar (www.hanfa.hr).

Membership:
Enrollment in the second individually-funded accounts pillar has been voluntary since 2009. A law passed in 2010 reassigned the second pillar contributions to the first pillar, and automatically transferred the balances of the individual accounts to the PAYGO program (only if the member opted out of the individually funded second pillar). The balances of the individuals who decided to remain in the first individually funded pillar, and those individuals entering the labor market who voluntary decide to enroll in that pillar, are currently managed in individual accounts.

Contributions / Payments:
The overall contribution rate to the pension system is currently 36%, of which the employer contributes 17.5% to the first pillar Pension Fund, while the worker contributes 18.5% (10% for pension contribution: 7% for health insurance; and 1.5% for unemployment insurance).

Benefits / Services:
The benefits granted by the second individually funded pillar at retirement age (early retirement is not allowed), allows members of the pension funds who have contributed for less than 15 years to withdraw their funds in the lump sum mode. If they contributed for more than 15 years, they can purchase a life annuity.

(Latest update: December 2019).

Kazakhstan (1998)

Law:
Law of Pensions in Kazakhstan

Date of Enactment:
June 1997

Type of System:
Multi – pillar scheme formed by a non-contributory public system (first pillar) and a mandatory private contributory system based on savings and individual capitalization (second pillar), which completely replaced the public pay-as-you-go system. People may also make voluntary contributions (third pillar).

Start of operations:
January 1998

Management Institutions:
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.

Supervisory Institution:
Unified supervision by the National Bank of Kazakhstan (www.nationalbank.kz).

Membership:
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 / Payments:
The contribution of workers to the pension saving funds is 10% of income. They can also make voluntary contributions. In the case of workers in risky or dangerous occupations, employers also contribute 5% of the worker’s salary to their individual account, thus totaling a contribution rate of 15%.

Benefits / Services:
The pension amount depends on the amounts contributed to the fund, the number of years of contribution and the corresponding rates of return obtained from the investments of the fund. 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 the second pillar benefits must be received through a life annuity in cases of survival, disability or death, leaving the  free choice of the life insurance company to the respective beneficiaries.

State Guarantee:
The State guarantees a minimum pension of 20 years for women and 25 years for men, for those who have contributed to the mandatory system,  provided that the sum of the joint pensions from the public and private systems is less than 70% of the legal minimum. The Government’s basic pension is provided regardless of the accumulated assets. This is determined annually in the Government budget.

(Latest update: December 2019)

Poland (1999)

Law:
Law of the Social Security System

Date of Enactment:
November 1998

Type of System:
Multi – pillar scheme made up of a second pillar: a public mandatory mixed contributory system in which the pay-as-you-go scheme (public, with nominal defined contributions (NDC) is complemented by the Savings and Individual Capitalization Scheme (private, with defined contributions DC), and a private complementary voluntary system (DC).

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.

Start of operations:
Year 1999

Management Institutions:
Universal Pension Companies (PTE) have been set up to manage the Open Pension Funds (OFEs)

Supervisory Institution:
Unified supervision by the Polish Financial Supervision Authority, KNF (www.knf.gov.pl).

Membership:
Membership of the individual capitalization system is mandatory for all those persons entitled to opt for Social Security. Those people who were between 31 and 50 years old when the reform was introduced (1st January 1999) were able to choose between entering both systems or remaining in the reformed first pillar, based on the pay-as-you-go system.
People over 50 years old had to remain in the first pillar while young people (under 30 years of age) had to enter 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 / Payments:
The social security contribution rate is 13.71% of the gross salary of workers. Of this percentage, 9.76 percentage points (pp) is for the old-age pension insurance contribution. If the insured person is a member of a OFE, a part of the contribution to his or her old-age pension insurance (9.76%) is transferred by the Social Insurance Institution (ZUS) to the OFE selected by the insured person. Since May 2011 the part of the contribution being transferred to OFE has been reduced from 7.33 pp to 2.3 pp of the basis of assessment and in 2013 it has increased to 2.8 pp. The difference between 7.3 pp and 2.3/2.8 pp has been located on the subaccount in ZUS. Since the 1st of February 2014 2.92 pp is transferred to OFE and 4.38 pp is transferred to subaccount in ZUS. Furthermore, people can choose if their new contributions would be transferred to OFE or the whole contribution (7.3%) would be transferred to subaccount in ZUS. As soon as an insured person reaches the statutory retirement age minus 10 years, the whole contribution (7.3%) is transferred to subaccount in ZUS and their savings in OFE are gradually transferred to subaccount in ZUS.

Benefits / Services:
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 pension mode.

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.

(Latest update: December 2019)

Sweden (1999)

Law:
Pensions Law

Date of Enactment:
June 1998

Type of System:
Multipillar system comprising a first noncontributory pillar that offers a guaranteed minimum pension (financed with taxes, for low-income individuals with at least 40 years of residence in the country), and a second contributory pillar with two elements: (i) public PAYGO program based on notional accounts (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.

Start of operations:
January 1999

Management Institutions:
The notional accounts scheme is managed by the Swedish Pension 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 shares of the fund, maintains the accounts, requests and provides information on the participating funds on a daily basis, and has a monopoly on the provision of life annuities requested on retirement.

Supervisory Institution:
The notional accounts 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).

Membership:
Enrollment in the public program (notional accounts) 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, the contributions of each worker (2.5% of gross salary) are deposited in their individual ‘investment with individual choice’ accounts; workers can choose to invest their contributions in up to five funds 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, which is managed by the AP-7; the worker is free to switch from the chosen fund at any time, and free of charge.

Contributions / Payments:
16% of wages is set aside to the notional accounts program and 2.5% to the private individually funded accounts program (PPM).

Benefits / Services:
Full or partial benefits can be requested from the notional and private individually funded accounts from the age of 61. Spouses enrolled in the PPM program may request a joint life annuity, and participants can contract 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 part.

(Latest update: December 2019).

Panama (2000)

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

Date Passed:
Individual accounts came to Panama in 1997, when SIACAP was created, but only began operating in the system in the year 2000. Individual accounts were created in the Social Security Fund (CSS) in 2005, as part of the Mixed Subsystem, which only began operating in 2008.

Type of System:
Multipillar or mixed system, comprising a noncontributory First Pillar, and a Second Pillar comprising SIACAP (mandatory for public servants) and the Mixed Subsystem, managed by the Social Security Fund (CSS), which has two components. The first component of the Mixed Subsystem is denominated “Defined-Benefit” (the former PAYGO system, an exclusively defined-benefit subsystem). Contributions to this subsystem go to a common solidarity PAYGO pension fund. The second individual savings component of the Mixed Subsystem, (a new system with individual accounts), grants benefits in accordance with the individual’s labor lifecycle savings. There is also a Third Voluntary Savings Pillar managed by private pension funds managers.

Startup Date:
SIACAP began operating on July 7, 2000; the Mixed Subsystem began operating on January 1, 2008.

Managing Agencies:
Social Security Fund (CSS) (www.css.org.pa). SIACAP includes the Investment Fund Managers PROGRESO AIFPC S.A., GRUPO BANCO ALIADO S.A., and the Recording and Paying Agency PROFUTURO AIFPC. S.A.

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

Enrollment:
Enrollment in SIACAP is mandatory for all government employees, with the exception of those people who were receiving pensions at the time the law was passed, and those government workers who met the requirements for obtaining a pension or complementary pension to December 31, 1999. The Mixed Subsystem includes the following people: (i) People enrolled in the CSS, who were 35 or less on January 1, 2006, and who explicitly chose to switch to this subsystem before December 31, 2007, which is irrevocable (those who did not exercise the option are automatically enrolled in the Exclusively Defined-Benefit Subsystem); (ii) All new dependent workers as of 2008, who contribute only to the Personal Savings Component: (i) Contributing self-employed workers in the service of the State who were 35 or less on January 1, 2007; (ii) Contributing self-employed workers who were 35 or less on January 1, 2007.

Mandatory and Voluntary Contributions:
In SIACAP, each government worker pays in a special voluntary contribution of 2% of the monthly salary. The state also pays in 0.3% of the salaries accrued by public employees. Those who opted for the Mixed Subsystem will contribute to the traditional PAYGO model on the first US$500 of salary, and to the individually funded system on all income exceeding that amount.

Benefits:
SIACAP grants benefits in addition to the permanent disability pension and the ‘absolute permanent disability due to professional risk and old age’ pension, which are granted to public servants pursuant to the Constitutional Framework Law of the Social Security Fund. The benefits of enrollment in the Mixed Subsystem and its Individual Savings Component are: (i) The amounts deposited in the individual savings account and the returns obtained on investments belong to the worker; (ii) Workers do not have to cover administrative expenses as in other pension funds (iii) “Individual Savings” are not attachable or subject to assignment or loan commitments; (iv) The benefits of the “ Individual Savings” component are imprescriptible.

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 pension (conditional) of USD 120 per month (“120 at 65” Program).

(Last update: December 2019)

Costa Rica (2000)

Law:
Law 7.983, or the Workers’ Protection Law.

Date of Enactment:
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 Pension System).

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

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

Membership:
Enrollment in the second pillar is mandatory for all dependent workers in the public and private sectors. At the beginning of the employment relationship, workers must choose a fund manager to manage their resources in the pension fund (ROP) and the Labor Capitalization Fund (FCL). If they fail to do so, the pension fund account will be managed by the fund manager of Banco Popular y de Desarrollo Comunal and the Capitalization Fund will be managed by the fund manager of the Costa Rican Social Security Fund (CSSS), or else, if enrolled in the National Teachers Pension System, both accounts will be managed by the fund manager of the Teachers’ Association. All workers are entitled to switch fund managers free of charge, but they can only exercise this right once per calendar month. They can switch fund managers again within one month if the commission charged by the fund manager increases, or if the fund manager merges with or is absorbed by another licensed agency.

Mandatory and Voluntary Contributions:
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). 1% is contributed by the worker and 3.25% by the employer. Additionally, the CCSS’ Disability, Old Age and Death System is financed with 5.08% of the worker’s wages paid by the employer, 3.84% by the worker and 1.24% by the State, totaling 10.16%.

Benefits:
Benefits can be received as a life annuity from an insurance company, or as a permanent income or programmed withdrawal (or both) from a pension fund manager. In the permanent income mode, the pensioner regularly receives the interests generated by the fund while maintaining the principal with the fund manager, which, at the time of the pensioner’s death, is assigned it to the designated beneficiaries. In programmed withdrawal, a regular amount is received and charged to the individual account, for a period of time consistent with life expectancy at retirement. If the right to a pension is acquired within the first 10 years of the promulgation of the Workers Protection Law, members can withdraw the entire fund if they wish to do so.

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 transfer and enrollment 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 Superintendency of Pensions and the CCSS. There is also a Contributory Pension System, in place since 1974 and managed by the CCSS, for persons in need of immediate economic assistance who fail to qualify in any of the existing contributory systems.

(Last update: December 2019)

Hong Kong (2000)

Law:
Mandatory Provident Fund – MPF – Schemes Ordinance.

Date of Enactment:
1995.

Type of System:
Multipillar system comprising a non-contributory public system (first pillar), which provides universal old age and disability pensions (full and partial) and a mandatory private occupational pension system (second pillar, Mandatory Provident Funds, MPF). People can also make voluntary contributions (third pillar).

Start of operations:
December 2000.

Management Institutions:
The MPF schemes are managed by a trust, banks, insurance companies or asset managers.

Supervisory Institution:
Mandatory Provident Funds Authority (MPFA, www.mpfa.org.hk).

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

Contributions / Payments:
The total contribution rate is 10%, with the employer and the worker paying 5% each. Contribution is not mandatory for workers with an income of less than HKD 7,100 per month (but voluntary), although employers must pay in the worker’s  5% contribution regardless of his decision. The self-employed must contribute 5% of their gross income. Casual workers make fixed contributions, based on contribution tables, like employers do. 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. The MPFs that contributions are paid in to 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.

Benefits / Services:
Since these are defined-contribution plans, the pension in the MPF plans consists in the accumulated sum of the contributions of workers and employers. The law does not require the pension to be received in the form of temporary income or a life annuity, since pensions are paid as a lump sum.  In cases of inability to work prior to the 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, the elderly and the disabled. Retirement program benefits are granted for two age brackets: those who are between 65 and 69 (normal old age) and those who are over 70  (advanced old age).

(Latest update: December 2019)

Latvia (2001)

Law:
Defined Contribution Pensions Law.

Date of Enactment:
February 2000

Type of System:
Multipillar system comprising a first non-contributory pillar; a second mandatory, contributory pillar (second pillar) in which a Defined-Contribution Notional Accounts program with PAYGO-based financing is complemented with an individually-funded program; and a third private, voluntary pension savings pillar.

Start of operations:
July 2001

Membership:
Individual accounts are mandatory for people under the age of 30 on July 1, 2001. Coverage is voluntary for people aged 30 to 49, on July 1, 2001.

Contributions / Payments:
Workers and employers jointly contribute 35.09% of the gross salary of the worker. 14 percentage points (pp) of that total contribution rate finance the notional accounts and 6 pp are assigned to the worker’s individually funded account; the remaining 15.09 pp is used to finance other social security benefits. (Source: https://www.ssa.gov/policy/docs/progdesc/ssptw/2018-2019/europe/latvia.html).

Benefits / Services:
At the legal retirement age, participants can choose to use their accumulated funds to buy a life annuity (LA, offered by an insurance company) or use the “refund” option. The latter means that members reassign their funds to the notional accounts to receive a benefit based on a variant of the formula applied in this program. Lump sum withdrawals are not allowed. If the employee decides to purchase an LA, then the State Social Security Agency must transfer the accumulated capital to the insurance company, for it to pay the pension to the person in this mode.

(Latest update: December 2018)

Bulgaria (2002)

Law:
Supplementary Mandatory Pension Insurance

Date of Enactment: Year 1999

Type of System: Multi – pillar scheme composed of a non – contributory scheme and a contributory public pay-as-you-go social security scheme, managed by the National Social Security Institute (first pillar), a mandatory private contributory system (second pillar), composed of savings and individual capitalization scheme, made up of two funds, the Universal Pension Fund (FPU) and the Occupational Pension Fund (FPO), and a complemenatry private voluntary system managed by the pension companies (third pillar).

Start of operations:
Year 2000

Management Institutions:
National Social Security Institute – first pillar schemes
Private Pension Provision Companies – Second and Third pillar schemes

Supervisory Institution:
Financial Supervision Commission (FSC, www.fsc.bg).

Membership: Enrolment in the FPU is mandatory for all workers born after 31st December 1959- In the FPO, enrolment is mandatory for people entitled to take early retirement for hard or hazardous conditions of labor. From January 1, 2016 the members have the right to opt out of the second pillar funds and transfer their account balances to the State Fund for Guaranteeing the Stability of the State Pension System and subsequently, upon retirement, to the Fund “Pensions” of the State Social Security (first pillar). They also have the right to transfer back their account balances to chosen second pillar fund, but not after 5 years before retirement.

Contributions / Payments:
The contribution rate in the FPU is fixed at  5% with the employer paying 55% and the worker 45%. From 2002 to 2007 the rate rose from 2% to 5%. For the FPO the contribution rate depends on the category of labor to which the member belongs, so this may be 7% or 12%. In the case of the FPO, the contribution is paid entirely by the employer.
The contribution rate to the pay-as-you-go system is 22.8% (8% for health insurance and 14.8% for pensions) for workers born after 31st December 1959 and 27.8% (8% for health insurance and 19.8% for pensions) for the workers born before January 1, 1960.

Benefits:
The Mandatory Universal Pension Fund (FPU) has to provide the insured with the reward of a lifetime retirement pension, and also a capital sum  of 50% of the accumulated pension fund in the case of his/her becoming permanently disabled over 89,99%, and the payment of a lump sum or deferred quantities to the heirs in the event of the death of the insured member.
The benefits of the Mandatory Occupational Pension Funds (FPO) are in the form limited period occupational pension for early retirement. In case of disability or survivorship the benefits are similar to those of the Universal Pension Fund (FPU). Both systems (FPU and FPO) grant the accumulated value of the fund to the heirs – spouse, ascendants and descendants – in a lump sum or deferred payments.

State Guarantee:
The State guarentees a minimum contributory pension; for persons who have completed 65 years of age and have 15 years of participation in the pay-as-you-go social security scheme. The State also guarantees social non – contributory pension for persons who have completed 70 years of age.

(Latest update: December 2019).

Croatia (2002)

Law:
Law on Compulsory and Voluntary Pension Fund

Date of Enactment:
Year 1999

Type of System:
Multi – pillar system consisting of a non – contributory public system (first pillar) and a mandatory mixed contributory system (second pillar) in which the (public) pay-as-you-go scheme is complemented with a (private) system of savings and individual capitalization. People may also make voluntary contributions (third pillar).

Start of operations:
The second pillar started operating in January 2002, complementing the public PAYGO program.

Management Institutions:
Private Pension Fund Administration Companies

Supervisory Institution:

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

Membership:
All individuals under 40 years of age on January 1, 2002, who have 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 / Payments:
Workers enrolled in the former, simple PAYGO system, contribute 20% of their gross salary. The minimum income for contributing is 3,047.6 HRK (approx. USD 469), and the maximum is 48,120 HRK (approx. USD 7,411). People who enrolled in the mandatory individually funded account system must contribute 5% to their individual accounts, and the remaining 15% is assigned as a contribution to the simple PAYGO system. The employer does not contribute.

Benefits / Services:
On retirement, the capital accumulated in the individual account must be used to purchase a life annuity from a licensed insurance company. If the member is married at the time of retirement, he can opt for a joint survival income (only if the spouses have accumulated their own rights under the mandatory pension scheme).

State Guarantee:
The government grants maximum and minimum pensions. The minimum pension is HRK 65.60 (approx. USD 9.51) for each year of contribution.

(Latest update: December 2019).

Estonia (2002)

Law:
The Pension Insurance Law.

Date of Enactment:
1998 (voluntary third 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 system comprises two types of pensions: (i) a fixed-rate non-contributory  minimum pension of EUR 175.439 in 2018 (Flat Rate National Pension), which is paid to all 63-year-old residents of Estonia 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

Start of operations:
The second  individual accounts pillar started operating in 2002.

Management Institutions:
Companies specializing in pension fund management.

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

Membership:
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.

Benefits:
Benefits are paid in the form of life annuities.

Contributions / Payments:
In the mixed contributory system (second pillar), the contributions are paid into the individually funded system and the PAYGO system. Contributions are paid into the individually funded system 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 individual account of the second pillar. The contribution to the PAYGO system, however, is 16% of the gross salary of the worker, fully funded by the employer.

State Guarantee:
To receive the minimum pension, people must submit an employment history of at least 15 years. The legal retirement age is currently 63 years for men; the retirement age for women has been gradually increasing by six months per year, to reach age 63 in 2016. From 2017, the retirement age for men and women will increase by three months per year, to reach age 65 in 2026.

(Last update: December 2019)

Kosovo (2002)

Law:
Pensions Law

Date of Enactment:
December 2001.

Type of System:
Multipillar system comprising a first pillar that grants a universal non-contributory pension to all workers over the age of 65: a second mandatory defined-contribution pillar; and a third voluntary, individually funded, or employer-sponsored, savings pillar.

Start of operations:
Year 2002.

Management Institutions:
In December 2001, the UNMIK 2001/35 Regulations created the Kosovo Pension Saving Trust (KPST), an independent non-profit agency, whose sole purpose is to manage the individual pension savings accounts, ensure the prudent investment of pension fund assets, and pay pensions through the purchase of life annuities.
The investments of the pension funds are outsourced to specialized asset managers selected by KPST.

Supervisory Institution:
Unified monitoring entrusted to the Central Bank of Kosovo (http://bqk-kos.org).

Membership:
Mandatory enrollment in the second individually funded accounts pillar, for all workers entering the labor market.

Contributions / Payments:
The second pillar of the savings system requires all workers permanently resident in Kosovo to contribute 5% of gross salary to the Pension Fund. Employers also contribute 5%. Workers can contribute an additional amount, to a cap of 15% of their annual salary.

Benefits / Services:
The regulations governing the decumulation phase are not yet available.

(Last update: December 2019).

Dominican Republic (2003)

Law:
Law 87/01 which sets up the Dominican Social Security System. This includes coverage in three types of insurance: Old-Age, Disability and Survivorship Insurance (pensions), Family Health Insurance and Industrial Risks Insurance.

Date of Enactment:
May 2001

Type of System:
Multi – pillar scheme made up of a non-contributory public system (first pillar) and a mandatory private contributory system based on savings and individual capitalization (second pillar) which included only workers from the private sector in what was known as the Dominican Social Insurance Institute (IDSS). Also, there are special pension programs for certain segments of workers. The new social security system is made up of three schemes: a Contributory Scheme, a Subsidised Contributory Scheme and a Subsidised Scheme.

Start of operations:
Year 2003

Management Institutions:
Pension Fund Administrators (AFP)

Supervisory Institution:
Superintendency of Pensions

Membership:
Enrolment in the system is mandatory, single and permanent for all workers, employed and self-employed. Employed workers, in both the public and private sectors, belong to the contributory scheme; self-employed workers with income equal to, or greater than the national minimun wage, belong to the Subsidised Contributory Scheme; and self-employed workers with unstable incomes below the national minimum wage belong to the subsidised scheme, as also the destitute and those people who are handicapped.

Contributions / Payments:
Social security contributions are currently 9.97% of salaries. 8% of the total contribution  goes to the member’s individual account;  a maximum of 1% to the Life and Survival Insurance Company; 0.4% to the Social Solidarity Fund; 0.5% to cover management costs of the respective AFP, and 0.07% to finance the operations of the Superintendence of Pensions.

Benefits / Services:
The system provides pension benefits for old age, partial or total disability, unemployment due to advanced age and survivorship.

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 60% of the minimum public wage. .

(Latest update: December 2019)

Russian Federation (2003)

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

Date of Enactment:
May 1998

Type of System:
Multi – pillar scheme made up of a non-contributory public system (first pillar) and a mandatory mixed contributory system (second pillar), in which the public pay-as-you-go scheme, funded through the federal budget and providing basic pensions, is complemented by the private Savings and Individual Capitalization Scheme, and a complementary private voluntary system offered by life insurers and private pension funds (third pillar).

Start of operations:
Year 2003

Management Institutions:
Non-State Pension Funds (NPF); State Pension Manager (VEB).

Supervisory Institution:
Federal Financial Markets Service (www.ffms.ru).

Membership:
All workers born from 1967 onwards 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 Accounts Program managed by the State Administrator “Vnesheconombank” (VEB – Pension Fund of the Russian Federation, PFR). From 2015 onwards, workers born after 1967 will also have the option of not participating in the NPF and only contributing to the Notional Accounts Program (workers born in 1966 or earlier cannot participate in the NPF). Each year, workers born in 1967 and onwards 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 / Payments:
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 and onwards 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 VEB; or a private management company) and the remaining 16 percentage points will go to the Notional Accounts Program (second pillar, notional accounts managed by VEB).

Benefits / Services:
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/)

State Guarantee:
After January 1, 2010, the basic State pension was incorporated into the pension insurance. This is a fixed amount paid to those with a minimum of 5 years of contributions before reaching the legal retirement age (60 for men, 55 for women). Although this is a fixed pension amount, greater benefits are granted to certain categories of individuals (for example, those older than 79, and the disabled, among others).

(Latest update: December 2019)

India (2004)

Law:
New Pension System Law (NPS)

Type of System:

Multipillar system comprising three pillars:

(1) A first non-contributory 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 living 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). Also, the program Pradhan Mantri Shram yogi Mandhan is available to workers from the unorganised sector, with an  income below  ₹15,000 (US$210), and between 18 and 40 years old, in which the beneficiary will receive a minimum monthly income of ₹3,000 ( US$42) after turning 60 years old, but that requires contributions of an amount that depends on the age of affiliation to the program. This program receives matching contributions from the state.

Date of Enactment:
2003

Start of operations:
Year 2004

Management Institutions:
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. The fund managers in the NPS must be asset managers duly licensed for such purposes.

Supervisory Institution:
Pension Fund Development and Regulatory 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 firms with at least 20 workers, in any of the 186 industrial categories that are covered; 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 / Payments:
EPF/EPS: Contribution is tripartite, totaling 12% of the gross salary of the employee; workers contribute 3.67% of their salary to the EPF; employers contribute 3.67% of the gross salary of their workers to the EPF, and 8.33% to the EPS; the State contributes 1.16%. The accumulated balance in the EPF receives an interest at a specific rate, announced and updated by the Government itself; NPS: contribution is bipartite, totaling 20% of the gross salary of the employee; employees contribute 10%, and employers as well.

Benefits / Services:
EPF: Partial withdrawals are allowed for specific expenses such as construction, education, weddings, illness, etc. Lump sum withdrawal is allowed at retirement age; EPS: a third of the accumulated funds 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 2019).

Lithuania (2004)

Law:
Law on State Social Insurance
Law on Pension Accumulation
Law on Voluntary Supplementary Pension Accumulation

Date of Enactment:
December 2002

Type of System:
Multi – pillar system comprising a first state-managed PAYGO pillar; a second voluntary defined-contribution pillar (with an opt-out option); and a third complementary, privately managed voluntary savings pillar.

Start of operations:
January, 2004 (Individually Funded Accounts).

Management Institutions:
The second pillar is managed by Pension Fund Managers or Life Insurance Companies.

The third pillar is managed solely by the Pension Fund Managers.

Supervisory Institution:
Unified monitoring entrusted to 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). Unlike most countries, the reform in Lithuania allows all workers to participate in the second pillar; in other countries, workers are discriminated against based on their age.

Contributions / Payments:
Under the existing legislation (after the 2013 reform), employers contribute 22.3% of wages, while workers contributed 3% of their income (for the purpose of obtaining old age, disability and survival benefits), totalizing 25.3%.  For workers who decide to participate in the individually funded program, 3 percentage points are assigned to the individual accounts (the remaining 22.3 percentage points remain in the PAYGO program).  The State also makes a matching contribution for voluntary additional contributions of 1.5%.  (Source: https://www.ssa.gov/policy/docs/progdesc/ssptw/2018-2019/europe/lithuania.html ; https://socmin.lrv.lt/en/activities/social-insurance-1/funded-pension-scheme)

Benefits / Services:
On retirement, pension fund members must use their accumulated assets to purchase a life annuity provided by a Pension Fund Manager. Lump sum and programmed withdrawals are possible only if the amount remaining in the member’s account is sufficient for purchasing a life annuity equivalent to the basic State-guaranteed pension.

State Guarantee:
There is a basic fixed-rate pension that depends only on the years of service. There are also monetary incentives for remaining in the active labor force after the legal retirement age, through increases of a 8% in the pension for each additional  year worked.

(Latest update: December 2019)

Nigeria (2005)

Law:
Pension Reform Law No. 2 (2014), which replaces Pension Reform Law No. 1 (2004).

Date of Enactment:
June 2004.

Type of System:
Defined contribution system with individual pension savings accounts. Workers can make contributions in addition to those paid in by their employer.

Start of operations:
December 2005.

Management Institutions:
Pension Fund Managers.

Supervisory Institution:
National Pension Commission of Nigeria – PENCOM (www.pencom.gov.ng).

Membership:
Enrollment in the pension system is mandatory for public employees and all employers in the private sector with 15 or more workers (workers can freely choose a fund manager to manage their funds). Exclusions: Judges, diplomats, military personnel, self-employed workers and citizens not covered by an equivalent program in another country, the clergy, private sector employees working in companies with three to 14 workers. Workers who were only three years from retirement in 2004 were exempt from joining the new contributory system.

Contributions / Payments:
The new Law (2014) has set contribution rates of 10% for the employer and 8% for the worker (there are no income ceilings for contributing). The Government contributes 1% of the gross wages of public sector workers.

Benefits / Services:
The private pension system offers the Life Annuity and Programmed Withdrawal pension modes.

State Guarantee:
Only  two states in Nigeria have social pensions. A noncontributory pension of NGN  5,000 (approx. USD 25)  was introduced in the State of Ekiti in 2011, and in 2012, a social program was also implemented in the state of Osun, providing an amount of nearly 10,000 NGN (approx. USD 50) per month, for those who cannot finance a pension individually.

(Last update: December 2019).

Slovak Republic (2005)

Law:
Act on Old – Age Pension Savings

Date of Enactment:
January 2004

Type of System:
Multi – pillar scheme composed of a public non – contributory system (first pillar), an obligatory mixed contributory system (second pillar) in which the (public) pay-as-you-go scheme is complemented by the (private) savings and individual capitalization scheme. Also, there is a voluntary complementary system managed by the pension funds and possibly the life insurance companies (third pillar).

Start of operations:
January 2005

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

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

Membership:
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. The option of enrolling in the new system is irreversible.

Contributions / Payments: The contribution to the old-age insurance amounts to 18% of the worker’s gross salary. Of this rate, 4.50 percentage points (financed by the employer) are directed to the individual account of the worker and 13.50 points go to the public PAYGO scheme. Each year the contribution destined to the individual account is increased by 0.25 points. Contributions are collected by the Social Security Agency (SIA).

Benefits / Services:
The system of savings and capitalization will provide various forms of benefits, ranging from early pensions to survivorship pensions and programmed withdrawal. Meanwhile, the pay-as-you-go system provides pensions “in favour of the spouse” for totally disabled married women or those who have reached 65 years of age in case of the death or divorce of the husband. It also grants pensions for disability (total and partial) and widowhood.

State Guarantee:
The State provides a minimum pension for those who complete a minimum employment period of 30 years, with partial pensions being envisaged for shorter employment periods.

(Latest update: December 2019).

Macedonia (2006)

Law:
Individually Funded Pension Insurance Law

Date of Enactment:
Year 2002

Type of System:
Multi – pillar system comprising a first public PAYGO pillar, corresponding to the mandatory pensions and disability insurance (Pensions and Disability Insurance Fund of Macedonia – PDIF); a second pillar of mandatory individually funded accounts; and a third pillar of voluntary pension savings.

Start of operations:
January 2006

Management Institutions:
Pension Fund Managers.

Supervisory Institution:
Specialized supervision carried out by the Agency for the Supervision of Fully Funded Pension Insurance, MAPAS, (www.mapas.gov.mk).

Membership:
Membership is mandatory for all those entering the labor market for the first time as of January 1, 2003 (who must enroll and contribute to a pension fund of their choice), and voluntary for those who were already enrolled in the mandatory pensions and disability insurance (pure PAYGO system) before January 1, 2003. The period in which these workers could enroll in a private pension fund with an individual account ended on December 31, 2005.

Contributions / Payments:
The total contribution rate to the pension system is 27.5% of gross salary. This rate is broken down into 18.4% to the pension and disability insurance and 8.6% to other concepts. From the rate of 18.4%, 6 points go to the second pillar funds (indiviodual account), and 12.4 points go to the PAYGO system. The PAYGO system provides old age, disability and survival benefits and a guaranteed minimum pension; the individually funded program only grants old-age pensions.

Benefits / Services:
Members who are eligible to receive a public pension can choose between buying a Life Annuity or opting for the Programmed Withdrawal mode. Members who are not eligible to receive a public pension can only buy a life annuity, and its value must be at least 40% of the minimum pension. If the accumulated assets are insufficient for purchasing a Life Annuity of that amount, members receive a lump-sum payment of the total amount of the accumulated funds.

State Guarantee:
The pension system in Macedonia has established a form of so-called minimum pension, which is a percentage of the average wage in the country, calculated on the basis of the length of the working life of the beneficiary.

(Latest update: December 2019)

Rumania (2008)

Law:
Mandatory Pension Funds Law No. 411/2004.

Date Passed:
2004, with amendments in 2007.

Type of System:
Multipillar system with a first public PAYGO pillar (social insurance); a second defined-contribution pillar that complements the PAYGO program; and a third complementary private voluntary savings pillar.

Startup Date:
January, 2008

Managing Agencies:
The second pillar is managed by private pension fund managers.

Supervising Agency:
Unified supervision by the Financial Supervision Authority (A.S.F.; http://asfromania.ro/).

Enrollment:
Enrollment in the individually funded second pillar is mandatory for all dependent and self-employed workers who were 36 years old on January 1, 2008. Enrollment is voluntary for all workers who were between 36 and 45 years of age on January 1, 2008.

Contributions:
3.75% of the gross salary of workers mandatorily enrolled in the individually funded second pillar on December 31, 2018, goes to the individually funded account, and 17.5% goes to the PAYGO system, totaling a contribution rate of 21.25%. The law initially envisaged that the contribution rate to the second pillar would be 6% by 2018 (and 9% to the PAYGO program), but due to a government decision, that measure became obsolete. Those not enrolled in the second individual accounts pillar, only contribute 25% of gross salary to the public PAYGO system.

Benefits:
On retirement, the members of the pension funds must use their accumulated assets to purchase a life annuity provided by a pension fund manager.  If the calculated monthly life annuity is less than a certain minimum amount, lump sum withdrawal of the funds is permitted, or else the payment of a pension for up to 5 years.

(Last update: December 2019)

Brunei (2010)

Law:
Law of the Old Age Pension and Disability System of 1955 (amended in 1984);   Employee Trust Fund (TAP) Law of 1992; Law of the Individually Funded Complementary Pension System of 2009 (Supplementary Contribution Pension, SCP, implemented in 2010).

Date Passed:
2009 (SCP)

Type of System:
Multipillar system comprising a first noncontributory pillar that offers a basic universal old age pension of BND 250 per month (approx. USD 179), financed with general taxes for people of 60 and older; a second mandatory contributory pillar in which two programs complement each other: (a) the workers’ trust fund program, in which employers and workers contribute 5% of the monthly gross salary each (10% rate of total contribution); (b) the individually funded program, in which workers and employers contribute 3.5% of the monthly salary each (7% of the total contribution rate); and a third  voluntary pension savings pillar, with any additional contributions that workers wish to make to the trust fund and individually funded programs. Note: the SCP program was created to complement the pensions of the TAP program, and in this regard, enrollment in the SCP is voluntary for workers; (once workers decide to enroll in the SCP, the decision is irreversible and it is mandatory for the employer to make a matching contribution to the individual account of 3.5% of the worker’s salary).

Startup Date:
January 2010 (SCP)

Managing Agencies:
The law requires the second pillar (SCP and TAP) pension funds to be managed by the Department of the Trust Fund of the Employees of the Ministry of Finance, under the supervision of the Board of Directors of the Workers’ Trust Fund.

Supervising Agency:
Specialized supervision by the Board of Directors of the Employees’ Trust Fund, of the Ministry of Finance.

Enrollment:
Enrollment in the TAP program is mandatory for all dependent employees between 18 and 60 years of age, as of January 1, 1993 (public servants employed before that date are covered by the State Pension Scheme). Enrollment in the SCP by employees is voluntary as of January 1, 2010. Enrollment in the SCP, and TAP is voluntary for self-employed workers.

Mandatory and Voluntary Contributions:
In the TAP, workers and employers each contribute 5% of the monthly gross salary. In the SCP, workers and employers contribute 3.5% of the monthly salary each.

Benefits:
TAP: funds are available for withdrawal after age 50; early withdrawal of up to 25% of the accumulated funds is allowed at age 50; workers up to 55 years of age, with at least 40,000 BND (approx. USD 28,640) in their individual accounts, or who have been members of the Provident Fund for at least 10 years, can withdraw up to 45 per cent of their funds for the purchase of a dwelling for personal residence; if a person permanently emigrates from the country, the payment of all the accumulated funds in a lump sum is allowed. SCP: the pension is obtained after turning 60 (monthly pension of at least BND 150, approx. USD 107) for up to 20 years, provided that there are at least 35 years of continuous contributions; those who do not meet this requirement on reaching retirement age, are paid their funds in a lump sum (there is no possibility of early retirement).

State Guarantee:
The State guarantees a universal non-contributory pension of approx. USD 179 to all workers aged 60 or more (those born in the country must have had at least 10 years of residence prior to requesting the pension; those living outside the country must have been resident for at least 30 years prior to applying for the pension).

(Last update: December 2019)

United Kingdom (2012)

Law:
Pension Act, 2008, which introduces automatic enrollment in the personal accounts system.

Date Passed:
2008

Type of System:
Multipillar system comprising a first non-contributory pillar which grants the so-called ‘Pension Credit’ of GBP 695 per month (approx. USD 847.49 per month), to low-income individuals aged 65 or more; a second pillar comprising two main systems: (a) a defined-contribution public pension system (single-tier state pension, STP); (b) a private defined-contribution and defined-benefit occupational pension system, and a third voluntary savings complementary pillar.

Note 1: Nationwide automatic enrollment (in the second pillar, private occupational system) started operating in October, 2012, for all workers not covered by a private occupational pension plan, for which the government created the National Employment Saving Trust (NEST).  Thus, from that date, workers who do not have an occupational pension scheme must choose between enrolling in a qualified pension scheme provided by their employer, or enrolling in the NEST system.

Note 2: There are a number of schemes in the private occupational pensions system, such as: (a) Self-managed pension plans, which require the appointment of an investment manager and a custodian; (b) Insurance schemes, provided directly by insurance companies (the benefits are protected by one or more insurance policies or life annuity contracts); (c) “Stakeholder” pension plans, which must be mandatorily offered by employers to their workers (if the company has five or more workers who have not established a personal or occupational pension plan. This is a group contracting system with individual accounts that can be offered by different financial institutions, such as life insurance companies, savings funds, banks, real estate investment companies, etc.); and (e) Unfunded schemes, funded on a PAYGO basis from corporate funds.

Startup Date:
October 2012

Managing Agencies:
In the private occupational pension system, pension plans can be offered and managed by different entities, such as life insurance companies, credit unions, banks, real estate investment companies.

Supervising Agency:
Specialized supervision by the Pensions Regulator (www.thepensionsregulator.gov.uk).

Enrollment:
Enrollment, or automatic membership, is mandatory nationwide for all workers who are not covered by a  private occupational pension plan; workers who do not have an occupational pension plan must choose between enrolling in a qualified pension system provided by their employer, or in the NEST system.

Mandatory and Voluntary Contributions:
Since April 2019,  the total minimum contribution rate is 8% (3% employer; 4% worker; 1% State). (Source: http://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment/how-much-do-i-and-my-employer-have-to-pay)

Benefits:
Members of the pensions funds have different options for using their accumulated funds: (i) Withdraw 25% of the fund in a lump sum, tax-free, and use the rest of the fund to purchase a life annuity; (ii) Withdraw 25% of the fund in a lump sum, tax-free, and reinvest the rest in funds designed to provide a regular income (lifetime income is not guaranteed, as in the case of the life annuity); (iii) Withdraw small amounts of the fund when required (for each withdrawal, 25% is tax-free and the rest is subject to tax); (iv) Withdraw the entire fund as a lump sum.

State Guarantee:
The State pays a non-contributory pension denominated “Pension Credit” of GBP 695 per month (approx. USD 847.49 per month), to lower income individuals over 65.

(Last update: December 2019).

Armenia (2018)

Law:
Funded Pensions Law of the Republic of Armenia.

Date Passed:
2014

Type of System:
Multipillar system comprising a first noncontributory pillar that offers a social old-age pension called ‘Old Age Social Pension”(funded by General taxes, for low-income individuals over 65); a second contributory pillar in which two programs complement each other: (a) a public PAYGO program; (b) an individually-funded program; and a third voluntary pension savings pillar.

Startup Date:
July 1, 2018

Managing Agencies:
Pension Fund Managers

Supervising Agency:
Unified monitoring entrusted to the Central Bank of Armenia (CBA, www.cba.am).

Enrollment:
From January 1, 2014 to June 30, 2018, affiliation to the individually funded program was mandatory for workers born on January 1, 1974; as of July 1, 2018, membership is mandatory for all workers, regardless of their date of birth.

Mandatory and Voluntary Contributions:
Workers contribute 5% of their salary (temporarily 2.5%) to their individual account, up to a monthly salary of AMD 500,000 (USD 1,027). Social insurance (PAYGO program) is financed through a portion of personal income taxes.

Benefits:
Workers can access their accumulated funds through a lump sum withdrawal, a Life Annuity or Programmed Withdrawal.

State Guarantee:
An “Old Age Social Pension” of AMD 10,067 (USD 24) is guaranteed to low-income individuals over 65.

(Last update: December 2019)