July 27, 2016.

The Chairman of the International Federation of AFPs, Guillermo Arthur, criticized the idea of ending the existing AFP system and replacing it with a PAYGO system.

In a letter to El Mercurio newspaper, the former Chairman of the Chilean Association of AFPs provided a brief outline of the decisions taken by other countries worldwide in matters related to retirement.

“Two countries have reversed their individually funded systems: Argentina and Hungary.” In both cases, the funds accumulated by the workers were transferred to the State,” he points out.

He goes on to say that “Poland, which conducted a partial reversal by lowering the contribution rate to the individually funded system, transferred all savings in government instruments to the State.”

Moreover, he says “In the past 20 years, the PAYGO systems, which are also called ‘defined benefit,’ have made the following changes: 75 countries increased the contribution rate, 52 raised the retirement age, and 64 adjusted the benefits formula, or reduced pension amounts outright.” Finally, he argues “Thus, those who propose ending the AFP system should bear in mind that it would entail losing the ownership of their savings, which would be transferred to a government-run ‘defined benefit’ system, in which nothing is ‘defined,’ apart from its name.”

Source: www.emol.com

July 27, 2016.

The Chairman of the International Federation of AFPs, Guillermo Arthur, criticized the idea of ending the existing AFP system and replacing it with a PAYGO system.

In a letter to El Mercurio newspaper, the former Chairman of the Chilean Association of AFPs provided a brief outline of the decisions taken by other countries worldwide in matters related to retirement.

“Two countries have reversed their individually funded systems: Argentina and Hungary.” In both cases, the funds accumulated by the workers were transferred to the State,” he points out.

He goes on to say that “Poland, which conducted a partial reversal by lowering the contribution rate to the individually funded system, transferred all savings in government instruments to the State.”

Moreover, he says “In the past 20 years, the PAYGO systems, which are also called ‘defined benefit,’ have made the following changes: 75 countries increased the contribution rate, 52 raised the retirement age, and 64 adjusted the benefits formula, or reduced pension amounts outright.” Finally, he argues “Thus, those who propose ending the AFP system should bear in mind that it would entail losing the ownership of their savings, which would be transferred to a government-run ‘defined benefit’ system, in which nothing is ‘defined,’ apart from its name.”

Source: www.emol.com