Last October 14, the International Federation of Pension Fund Administrators (FIAP) and Libertad y Desarrollo (LyD) jointly presented the FIAP study “Reversals: While Europe advances towards individually-funded pension systems, some are proposing a return to the PAYGO pension system in Latin America” (only the Spanish version available for now, here).

Rodrigo Acuña, FIAP’s external adviser, Partner of PrimAmérica and Economist graduated from the Catholic University of Chile, and Karol Fernández, head of the Pension Studies Department of the Office of the Undersecretary of Social Security, Professor at Adolfo Ibáñez University and Doctor in Economy from Oxford University, spoke on the occasion.

The experts analyzed the pillars of the pension systems; the Solidarity Pension System: Non-contributory Pensions; the Mandatory Contributory System and the Voluntary Pension Savings Pillar.

They then explained the individually-funded pension contributory systems, stating that “They can provide better and safer pensions in the long-term; they enable increasing pensions and non-contributory pension amounts and have had positive impacts on the lives of members and the population.”

They also addressed the PAYGO pension systems and experience with them in Latin America, concluding that they are “regressive and lacking solidarity.” They also pointed out the risks of the collectivization of fund ownership, based on experiences in the region.

In conclusion, they analyze the reversion of countries from the individually funded system: “although it is said that a total of 18 reverted their individually-funded pension systems, the truth is that only Argentina, Hungary, Poland and the Czech Republic have done so.”

Hernán Cheyre, the Public Policies Councilor at LyD and director at the Corporate Research Centre at UDD, commented on the study prior to adjourning the meeting.