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Chile: Association of AFPs suggests improving official statistics on average pensions

26 September, 2013

Source: http://diario.latercera.com

The Chilean Association of AFPs called on the Superintendency of Pensions to improve the statistics it provides on the average pensions that members receive.

The Trade Association explained that 140 thousand women had enrolled in the system at the age of 65 for the sole purpose of obtaining the Bonus per Child Born Live. Hence, they have contributed only once in their lives. Furthermore, many apply for the Solidarity Pension Contribution (APS), which according to the Trade Association further distorts the average pension amount that appear in the statistics.

According to the Regulator’s figures, in August 2013, the average old age pension paid was CLP 165,879 (approx. USD 324).

The Association mentions other factors that affect the accuracy of the Regulator’s figures, such as pensioners from other systems who enroll in the AFPs and subsequently retire again, and members with less than 10 years of contributions with low savings.

According to the report, the recipients of the bonus-per-child-born-live as a pension, the APS and pension gaps affecting the system’s average must be identified. “It is obvious that if a person contributes for one year, or for one month, he will have a very low pension and that does not mean that the system is not functioning properly.”Even though we make a return on that contribution, the amount of itself is very low,” said Francisco Margozzini, General Manager of the Association of AFPs.

He says that it “is a very important issue, because those are the averages that discouraged people (…) “What is important is that people should be aware that the amount of the pension depends on the number of years they contribute and their savings effort and that is what statistics today do not reflect,” he added.

Margozzini pointed out that they had already requested the Regulator to take this situation into account: “It was well received. They understood both the bonus-per-child-born-live and the contribution density issues. I understand that they are working on publishing the new statistics, which will be very useful for the public.”

The document also points out that mistakes had been made by the people who calculated the replacement rates (what is received as a pension compared to income) at levels of 35% on average.

This is because they take the average pension paid and divide it by the taxable income of current contributors. According to the report, the calculation is not correct, “because the statistical data of the taxable income includes people who contributed in a particular month, while the pension data include retired members, who do not necessarily pay contributions on 100% of the work they perform.”

Therefore, he says that pension levels must be calculated according to the number of years of contributions, which will prove that the greater the number of years of contributions, the higher the amount of the pension.

They point out that according to a study by the Directorate of Scientific Research and Technology of the Catholic University of Chile (DICTUC) commissioned by the Trade Association, the replacement rate was 87% for men and 58% for women.

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