Pension Systems’ Reforms

Countries that have introduced a mandatory or cuasi-mandatory individually-funded pension programs – sorted by starting year of operations.

The Multiple Pillar terminology used to describe the structure of the Pension Systems of each one of the countries described in this section, follows the internationally accepted taxonomic guidelines which are commonly used. This classification is as follows:

First Pillar: Non-contributory or social pensions pillar, financed with the public budget (general or specific taxes). There are countries that have universal non-contributory pensions, without means testing; other countries focus this type of pension on lower income people, through means testing.

Second Pillar: The mandatory contributory pillar of the pensions system, comprising mainly two types of components: (i) a state-managed PAYGO program, and/or (ii) an individually funded program, managed by private agencies.

Third Pillar: Voluntary contributory pillar of the pension system, with tax incentives to stimulate complementary pension savings (in addition to the mandatory Second Pillar savings). Depending on the country, this Pillar is managed by private entities, banks and other institutions.

Below you can find the basic operation of the pension systems that have mandatory or quasi-mandatory individual savings programs.

Malaysia (1951)

Malaysia (1951)

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

Date Passed: 1951

Type of System: Multipillar, comprising:

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

A second mandatory pillar with two components:

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

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

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

Startup Date: 1951

Managing Agencies: The EPF is managed by the State.

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

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

Contributions/Assignments:

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

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

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

Pensions/Benefits:

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

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

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

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

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

(Last updated: December 2022)

Singapore (1955)

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

Date Passed: 1953

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

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

Start-up Date: 1955

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

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

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

Contributions/Assignments:

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

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

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

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

Summary

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

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

Pensions/Benefits:

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

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

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

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

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

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

(Last updated: December 2022)

Denmark (1964)

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

Date enacted: 1964 (ATP)

Type of System: Multipillar system, comprising:

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

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

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

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

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

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

Started operating: 1964 (ATP)

Managing agencies: The ATP is government-managed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Last updated: December 2022)

Chile (1981)

Law:
Decree Law 3,500

Date Passed:
November 4, 1980

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

Startup Date:
May 1981

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

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

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

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

Contributions/Assignments:
Contributions are a percentage of members’ salaries or incomes, with a taxable ceiling of 81.6 Unidades de Fomento (USD 3,297 as of Dec. 2022). The contribution rate is 12.69%, of which 10 points go to the individually funded account, plus an additional commission on the income, determined by each fund manager, including the disability and survival insurance premium. Employers must Insurance premium and workers must pay the commission on the salary charged by the AFPs. As of December 2022, the commission charged by the AFPs has fluctuated between 0.58% and 1.45% of the salary, with a weighted average per number of contributors of 1.15%. On the same date, the disability and survival insurance premium (paid by the employer for dependent workers and by self-employed workers themselves) was 1.54% (the same for all AFPs).

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

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

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

(Last updated: December 2022)

Australia (1992)

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

Date Passed:
January 1992.

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

Startup Date:
July 1, 1992

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

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

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

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

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

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

(Last updated: December 2022)

Peru (1993)

Law:
Law 25,897.

Date Passed:
December 6, 1992.

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

Startup Date:
June 1993

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

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

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

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

Contributions/Assignments:

Workers who remain in the “Commission on income” scheme contribute 13.34% of their taxable income to the private system, on average, as of 12.31.2022. 10% of that contribution is paid into the individually funded account and the rest is distributed between the Insurance Company (financing of disability and survival insurance – 1.74%) and the AFP (1.60%).

The contribution to the PAYGO system is 13%.

Contributions to pension systems are not tax deductible.

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

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

(Last updated: December 2022)

Colombia (1994)

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

Date Passed:
December 1993

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

Startup Date:
1994

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

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

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

Contributions/Assignments:

The contribution rate to the Individually Funded Savings System by dependent workers is 16% of the monthly taxable base income, of which 75% is paid by the employer and 25% by the enrolled member [11.5% goes to the individually funded account; 3% is distributed between the payment of the disability and survival insurance premium (average of 2.29% as of 09.30.2022) and the Fund Manager’s management commission (average of 0.71% as of 09.30.2022); and 1.5% goes to the minimum Pension Guarantee Fund].

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

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

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

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

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

(Last updated: December 2022)

Uruguay (1996)

Law:
Law 16,713

Date Passed:
September 3, 1995

Type of System:

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

1) In the case of members with nominal wages below nominal income cap 1 (approx. USD 1,512 as of 12/31/2021) who have marked the Article 8 option, the contribution is divided into 50% for the PAYGO system and 50% for the individually funded system. In this case, the calculation is as follows: first the total contribution destined to retirement (15% of the nominal salary) is calculated, and then divided in half; 50% remains in BPS and the other 50% is transferred to an AFAP. If workers did not opt for Article 8, all contributions must be made to the PAYGO system (contribution to the individually funded system = 0).

2) When an individual earns wages between income cap 1 and cap 2 (approx. between USD 1,512 and USD 2,268 as of 12/31/2021) and has marked the Article 8 option, 50% of the contribution corresponding to income up to cap 1 goes to the individually funded system and the rest of the contribution goes to the PAYGO system. Workers who did not opt for Art. 8, contribute 15% of their wages up to cap 1 (approx. USD 1,512) to the PAYGO system, and 15% of wages exceeding cap 1 and up to cap 2 (approx. USD 2,268) to the individually funded regime.

3) When Wages are between cap 2 and cap 3 (approx. between USD 2,268 and USD 4,535, as of 12/31/2021), the distribution is different: the part of the contribution up to cap 1 goes entirely to the PAYGO systems, and the rest of the contribution goes to the individually funded system. If the worker’s nominal salary exceeds cap 3, the discount is applied only up to cap 3, and the remaining amount is not subject to contributions and is credited to the worker’s liquid salary. In cap 3 salaries, the contribution corresponding to cap 1 goes to the PAYGO system and the contribution corresponding to amounts between cap 1 and 3, goes to the AFAP.

Startup Date:
April 1, 1996.

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

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

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

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

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

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

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

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

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

(Last updated: December 2022)

Bolivia (1997)

Law:
Law 1,732

Date Passed:
November 1996

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

Startup Date:
1997

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

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

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

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

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

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

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

(Last updated: December 2022)

China (1997)

Mexico (1997)

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

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

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

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

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

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

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

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

Contributions/Assignments:
IMSS workers – The total contribution rate to the Retirement, Unemployment in Old Age and Old Age Subaccount (RCV) is 6.5% of the worker’s salary, jointly contributed by the worker (1.125%), the employer (5.15%) and the State (0.225%). The Social Contribution (provided by the State) is also deposited in each individual account and progressively decreases from 4.32% for 1 minimum wage to 0.38% for the ceiling of 15 Measurement and Update Units (UMAS), for every working day, updated in accordance with the table of Article 168, Section IV of the Social Security Law reformed in 2009. For a member with 4.098 times the UMA, this Social contribution is 1.53% of salary as of December 2021. Thus, the State’s total contribution to the individually funded old age account is 0.225% + 1.53% = 1.775%. The Disability and Survival Insurance (2.5%) is managed by the Mexican Social Security Institute (IMSS). Workers must contribute 0.625% of their salary, companies 1.75% of salaries, and the State 0.125% to finance this insurance. Thus, the total contribution to the pension system in this case is 1.75% by the worker, 6.9% by the employer, and 1.88% by the State, totaling 10.53%.

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

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

(Last updated: December 2022)

El Salvador (1998)

Law:
The Pension Savings System Law.

Date Passed:
December 1996

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

Startup Date:
1998

Managing Agencies:
Pension Fund Managers

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

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

Contributions/Assignments:

Contribution to this system is 15% of the worker’s salary, with 7.25% charged to the worker and 7.75% to the employer; the worker’s contribution goes entirely to the worker’s so-called Individual Pension Savings Account (CIAP). Part of the 7.75% contributed by the employer is used for paying the AFP commission and the disability and survival insurance premium (the sum of both of them was a maximum of 1.9% of salary in 2021); the average AFP commission to 31.12.2021 was 0.89%; the insurance premium was 1.01%, another part (5%) goes to the so-called Solidarity Guarantee Account (CGS), and another part (0.85%) to the worker’s CIAP. Thus, the total contribution to the CIAP is: 7.25% (worker) + 0.85% (employer) = 8.10%.

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

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

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

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

(Last updated: December 2022)

Hungary (1998)

Kazakhstan (1998)

Law:
Kazakhstan Pension Law

Date Passed:
June, 1997.

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

Startup Date:
January 1998

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

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

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

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

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

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

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

(Last updated: December 2022)

Poland (1999)

Law:
Social Security System Law

Date Passed:
November 1998

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

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

Startup Date:
1999

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

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

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

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

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

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

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

(Last updated: December 2022)

Tajikistan (1999)

Sweden (1999)

Law:
Pensions Law

Date Passed:
June 1998

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

Startup Date:
January 1999

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

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

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

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

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

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

(Last updated: December 2022)

Panama (2000)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Last updated: December 2022)

Costa Rica (2000)

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

Date Passed:
February 2000

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

Startup Date:
2000 (Mandatory Complementary Pensions Regime).

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

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

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

Contributions/Assignments:

The contribution rate to the savings and individually funded Mandatory Complementary Pensions System is 4.25% of the worker’s taxable income (fully paid into the member’s account). Of this percentage, 1% is contributed by the worker and 3.25% is contributed by the employer. In addition, as of January 2011, a regulatory change established a new scheme for charging commissions on the balance (% of the managed fund), with a cap of 0.35% of the fund from the year 2020.

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

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

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

(Last updated: December 2022)

Hong Kong (2000)

Law:
Mandatory Provident Fund Schemes Ordinance – MPF

Date Passed:
1995

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

Startup Date:
December 2000

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

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

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

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

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

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

(Last updated: December 2022)

Latvia (2001)

Bulgaria (2002)

Law:
Mandatory Supplementary Pension Insurance Law.

Date Passed:
2000

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

Startup Date:
2002

Managing Agencies:
National Social Security Institute – first pillar

Private Pension Provision Companies – second and third pillars.

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

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

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

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

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

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

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

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

(Last updated: December 2022)

Croatia (2002)

Law:
Mandatory and Voluntary Pension Funds Law.

Date Passed:
1999

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

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

Managing Agencies:
Pension Fund Managers

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

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

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

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

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

(Last updated: December 2022)

Estonia (2002)

Estonia (2002)

Law: Pension Insurance Law.

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

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

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

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

Administrative Agencies: Companies specializing in pension fund management.

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

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

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

Pensions/Benefits: Pensions are paid in life annuities.

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

(Last updated: December 2022)

Kosovo (2002)

Dominican Republic (2003)

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

Date Passed: May 2001

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

Startup Date: 2003.

Managing Agencies: Pension Fund Managers (AFPs).

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

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

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

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

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

(Last updated: December 2022)

Russian Federation (2003)

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

Date Passed: May 1998.

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

Startup Date: 2003.

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

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

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

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

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

(Last updated: December 2022)

India (2004)

Law: The New Pension System (NPS) Law

Date Passed: 2003

Type of System: Multipillar, comprising three pillars:

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

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

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

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

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

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

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

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

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

Membership:

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

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

Contributions/Assignments:

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

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

Pensions/Benefits:

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

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

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

(Last updated: December 2022)

Lithuania (2004)

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

Date Passed: December 2002

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

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

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

The third pillar is managed by the Pension Fund Managers.

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

Membership:

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

Contributions/Assignments:

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

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

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

State guarantee

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

(Last updated: December 2022)

Nigeria (2005)

Taiwan (2005)

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

Date Passed: 2004

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

Start-up date: 2005

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

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

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

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

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

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

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

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

(Last updated: December 2022)

Slovak Republic (2005)

Law: Old-Age Pension Savings Act

Date Passed: January 2004

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

Startup Date: January 2006

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

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

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

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

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

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

(Last updated: December 2022)

Macedonia (2006)

Law: Mandatory Individually-Funded Pension Insurance Law.

Date Passed: 2002:

Type of System: Multipillar 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 mandatory individually funded accounts pillar and a third voluntary pension savings pillar.

Startup Date: January 2006

Managing Agencies: Pension Fund Managers.

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

Membership: 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/Assignments: The total contribution rate to the pension system is 28% of gross salary. This rate is broken down into 18.8% for old-age and disability insurance and 8.6% for other items. Of the 18.8%, 6 points go to the mandatory individually funded savings system and 12.8 points to the PAYGO system. The PAYGO system grants old-age, disability and survival pensions and a minimum pension guarantee; the individually funded program only grants old-age pensions. (Source: https://ww1.issa.int/node/195545?country=907)

Pensions/Benefits:

Members who are eligible to receive a public pension can choose between purchasing 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, the value of which 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 kind 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.

(Last updated: December 2022)

New Zealand (2006)

Law governing the quasi-mandatory scheme (automatic enrollment):

KiwiSaver Act, 2006

Date on which the quasi-mandatory (automatic enrolment) scheme was passed:

September 6, 2006

Type of system:

Multi-pillar scheme comprising a non-contributory PAYGO system (NZS: New Zealand Superannuation) [first pillar] and an individually funded occupational savings system with automatic enrollment (Kiwisaver) [second pillar]. Individuals can also make voluntary contributions to the third voluntary pillar.

Date on which the quasi-mandatory (automatic enrollment) scheme was passed:
July 1, 2007

Managed by:

New Zealand Inland Revenue acts as a central manager and transfers contributions to the pension provider of the employee’s choice. If the employee does not choose a provider, contributions are paid to one of the 9 providers by default.

Supervisory Agency:

The Financial Markets Authority (FMA) regulates the system.

Enrollment:

Dependent workers between the ages of 18 and 65 are automatically enrolled in a KiwiSaver plan at their workplace and can opt out between the second to the eighth week of employment.

Self-employed workers, on the other hand, can voluntarily choose to open a KiwiSaver account through any provider (private fund managers). Once workers have enrolled, they will not be able to opt out.

Mandatory and Voluntary Contributions:

The minimum contribution rate to the Kiwisaver plan is 6% of income, shared equally between workers and employers. Workers can opt for an additional higher personal contribution rate of 4%, 6%, 8% or 10%. To incentivize savings, the government provides a subsidy to savers who meet certain criteria, capped at NZ $521 per year (approx. $319) As part of the subsidy, new participants in Kiwisaver received an additional contribution from the government of NZD 1,000 (approx. USD 612) until May 2015,

Pension Options:

The official retirement age is 63 for both women and men. On reaching this age, individuals are entitled to receive all of their funds in a lump sum, instead of a pension.

State guarantee:

The State guarantees a universal old-age pension from New Zealand’s Superannuation program, requiring a minimum of 10 years of permanent residence in the country from the age of 20, including at least 5 years after turning 50, and residence in the country on the date of the application.

The State also runs a solidarity pension system, providing old-age benefits, disability pensions, caregiver’s allowances, disability benefits, spouse’s pensions, survivor’s pensions, orphan’s pensions, funeral allowances, and survivor benefits.

References: link1, link2, link3, link4

Uzbekistan (2007)

Law: Law of 2004 that created the individually funded system as a complement to the public PAYGO system.

Approval Date: 2004

Type of System: Uzbekistan’s pension system comprises a first non-contributory social assistance pillar and a second pillar in which a public PAYGO system is complemented with another individually funded system.

Start-up Date: 2007 (individually funded program)

Managing Agencies: The People’s Bank manages individual accounts.

Supervising Agency: The Ministry of Finance (https://www.mf.uz) provides overall supervision and coordination. The Extra-budgetary Pension Fund, dependent on the Ministry of Finance, manages the programs. The tax authority collects the contributions.

Enrollment: Enrollment in the individually funded system is mandatory for dependent workers, and voluntary for self-employed and other categories of workers.

Contributions/Assignments: In the public PAYGO system, workers contribute 8% of salary and the employer 25% (15% for small and micro companies). In the individually funded system, workers mandatorily contribute 2% of salary (the employer does not make contributions to this system). Workers can voluntarily make additional contributions to the individual accounts system.

Pensions/Benefits: The pensions derived from the individual accounts [payable at retirement age (60 for men, 55 for women)], are based on the total contributions of workers plus the accrued interest, and can be paid in monthly instalments, or in a lump sum. The interest rate is determined by the Banco Popular in coordination with the Central Bank and the Ministry of Finance, and must not exceed the inflation rate. If a worker dies before retirement, the survivor receives the funds in the account in a lump sum. Workers are not allowed to withdraw their funds for any purpose other than retirement.

State Guarantee: The government pays a non-contributory welfare pension, subject to means testing, to all men aged 65 or more with less than 25 years of employment, and women aged 60 or more, with less than 20 years of employment.

(Last updated: December 2022)

The Netherlands (2007)

Law: The legal framework for occupational pensions comprises the Pensions Law (2007), the 2000 Mandatory Enrollment in an Industry-Wide Fund Law (Bpf 2000), the Mandatory Pension Law for Professional Groups (WVB) and the Law governing Equal Pension Rights in the Event of Divorce (WVPS) (http://www.iopsweb.org/resources/48238337.pdf)

Type of System:

First PAYGO pillar: General Old-Age Pensions act (AOW): paid to all individuals at the official retirement age, funded by tax revenue.
Second pillar: Occupational pensions, associated with a particular industry or company, in which the vast majority of the country’s employees are enrolled. It can be declared mandatory in some industries by the Ministry of Social Affairs and Employment.
Third pillar: Banking or individual insurance products, with tax benefits up to a certain amount. Important for people who do not save in the second pillar, such as self-employed workers.

Managing Agencies: Private pension funds (at industry, corporate or independent professional level) or insurance companies.

Supervisory Agency: There are two organizations that supervise pension funds and insurers: the Nederlandsche Bank (DNB) and the Dutch Financial Markets Authority (AFM). Each agency has its own oversight area.

De Nederlandsche Bank NV (DNB): Pension providers require a license from the DNB. Requirements include sufficient financial assets and a suitable board of trustees. Under the Pensions and Financial Supervision Laws, the DNB Exercises strict oversight over the financial transactions and management of pension providers.

The Dutch Financial Markets Authority (AFM): By law, pension providers are obligated to provide certain information to interested parties. This obligation involves strict topicality, understandability and content requirements. The AFM ensures that pension providers meet these requirements. The AFM also supervises compliance with the duty of diligence. The purpose is to advise members on investment options, where appropriate.

Enrollment: Occupational plans cover public and private sector employees, including civil servants. Mandatory industry-level pension schemes cover all employees in the respective industry, whether public or private workers. In the other schemes, coverage is regulated by the applicable scheme regulations. The Minister of Social Affairs and Employment may make enrollment in a pension plan mandatory for the entire profession.

Contributions/Assignments: The contribution rate in the public PAYGO system is 17.9% of taxable income.

The contribution to the second occupational pensions pillar is a fixed percentage of income (approximately 16 percent of gross income). Solidarity is achieved by establishing an average contribution: all members pay an equal percentage of their salary or an equal contribution to the pension provider, who invests this contribution until the retirement date.

Pensions/Benefits: Occupational pension plans can include three elements: old age, survival and disability pensions. Not all occupational pension schemes include these three elements. Trade unions and employers’ organizations jointly decide on the inclusion of these elements.

State Guarantee: The AOW provides public pensions, in which rights to 2% of the full pension are acquired per year worked in the country. Members who live alone receive € 1,187.43 (net, without tax credit, 2020) (USD 1,344); those who are married or live with a partner receive € 943.26 (net, without tax credit, 2020) (USD 1,067). These amounts correspond to the full pension (50 years of contribution). (Source: https://www.pensioenfondsstaples.nl/en/about-pensions/pensioen-ontvangen/dutch-state-pension-aow)

(Last updated: December 2022)

Italy (2007)

Automatic Enrollment System Act:

Law 296/2006

Date of Approval of the automatic enrollment system:

January 1, 2007

Type of system

Italy’s pension system comprises three main pillars:

State Pension (First Pillar): This is the state public PAYGO pension system (notional accounts). To qualify for a state pension (pensione di vecchiaia), workers must have at least 20 years of social security contributions. (*)
Occupational or Employment Pensions (Second Pillar): These are supplementary pension plans organized by employers, which supplement the state PAYGO pension.

2.1 Automatic Enrollment Plan (AE): Italy introduced an AE plan in this second pillar in January 2007, becoming the first EU member to date to do so. In this plan, mandatory for all private sector employees at the time of its introduction, and subsequently mandatory for all new private sector employees, the flow of contributions to the so-called “Trattamento di Fine Rapporto (TFR)” (“treatment at the end of the employment relationship”) is paid into an occupational pension plan by default. The employee has six months to opt out. The TFR is a severance pay provision that has been mandatory for private sector companies since 1982. Contributions are 6.91% of an employee’s salary. Prior to the introduction of the EA plan, and thereafter for employers with fewer than 50 employees, contributions that the employee does not choose to allocate to pension savings are held within the company by the employer as book reserves. Since the introduction of the EA plan, in companies with 50 or more employees, if the employee decides not to allocate contributions to pension savings, they are paid into a fund of the National Social Security Institute (INPS), which manages the notional public PAYGO system. At the end of the employee’s employment relationship, the employee can opt to settle the compensation or use it for retirement savings.

Private Pensions (Third Pillar): These are private, individual pension plans that individuals can voluntarily open to supplement their retirement income.

(*) Note: On 01/01/2012, a progressive change from the former defined benefit PAYGO system to a PAYGO system based on notional accounts was introduced through the Fornero reform. Workers who started contributing in January 1996 are fully covered by the new notional accounts system. Workers with 18 or more years of contributions on 12-31-1995 remained in the format defined benefit system until December 2011, and switched their contributions to the notional accounts system as of 1 January 2012. Workers with less than 18 years of contribution on 12-31-1995 remained in a dual pro rata system based on the number of years of contributions before and after 31-12-1995: i.e., the former system was applicable for the former contribution period until December 1995, and the notional accounts system was applied for contributions from that date.

The Fund Managers:

There are two types of pension funds in the second occupational pillar in Italy:

Closed or corporate pension funds implemented by a single company, or sectoral pension funds created by the employers’ association and the trade unions for a specific group of participants.
Open pension funds that are offered by banks, insurance companies or investment management companies for a generic group of participants, i.e. the self-employed.

All pension funds have to sign an agreement with an external investment manager, which can only be an insurance company, a bank or a registered asset management company (‘Societa Gestione Risparmio’ or SGR). All pension funds are currently defined contribution (CD), as this is the only type of pension plan allowed. Defined benefit (DB) plans are restricted to pre-existing funds (**).

(**) Note: Prior to 1993, there was no coordinated legislation regulating pension provision and the only private pensions available were the pre-existing funds, which did not have clear structures or legal processes. Hence, employers who established pension plans were able to structure the benefits they offered and the means to fund them, almost at will. Pension funds established before November 15, 1992 (pre-existing funds) may retain their former tax treatment, provided they were closed to new participants prior to April 28, 1993.

Supervisory Agency:

General oversight is provided by the Ministry of Labor and Social Policy (http://www.lavoro.gov.it/) and the Ministry of Economy and Finance (http://www.tesoro.it/).

The National Social Security Institute (https://www.inps.it/) collects contributions and manages the national notional PAYGO accounts program, through its branches, as well as a number of special programs for certain categories of insured workers.

COVIP (Commissione di Vigilanza sui Fondi Pensione), is the national authority responsible for the oversight of Italian private occupational pension funds, as well as information on their competencies, tasks and internal organization.

Affiliation:

PAYGO system with notional accounts: Membership is mandatory for private sector employees, including domestic and self-employed workers (coverage is voluntary for contract and professional workers).

Contractual Occupational Funds: Workers may join the plan only if they meet specific requirements set forth in the fund’s laws that identify them as members of an “aggregation.” The fund’s bylaws initially set a target enrollment rate to be achieved within a time frame defined by the supervisor. When this threshold is reached, the supervisor authorizes the fund to start operating. Thereafter, the fund can start collecting contributions from members. However, contributions are not invested until the pooled fund reaches a minimum amount and a financial intermediary is appointed to manage the fund’s resources.

Open Occupational Funds: There are no individual membership requirements. Collective membership requires employment by the employer who signed the agreement. Due to the specific nature of the fund, the sponsoring institution’s sales force is primarily responsible for enrolling members. Collective membership is proposed by specialists at the corporate level, whereas the retail sales force throughout the territory is responsible for individual membership.

Mandatory and Voluntary Contributions:

PAYGO system with notional accounts: contributions are paid to the National Social Security Institute (INPS). Contributions are 33% of salary, of which approximately one third is paid by the employee (9.81%) and 2/3 by the employer (23.81%).

Contractual Occupational Funds: All pension funds are currently defined as contribution plans. The contribution amount is set out in the fund’s bylaws. Typically, funds are funded through contributions from both the employee and the employer, and through the TFR (for subordinate employees). Supplementary contributions are also allowed.

Open Occupational Funds: Collective membership is funded by contributions from the employer, employees, and the TFR. To receive the TFR from workers who do not make a decision (tacit consent), the fund must have a specially created guaranteed sub-fund. Individual membership is voluntary.

Pension Modalities:

PAYGO system with notional accounts: the accumulated “notional capital” is converted into a pension (income), considering the life expectancy of the generation to which the pension applicant belongs at the time of retirement. The old-age pension is calculated as the contributions accumulated throughout the working life, to which a reassessment of the percentage of GDP increase is applied. Finally, a coefficient or rate of conversion of accumulated capital to income is applied, depending on the age of the applicant. This latter coefficient is based on the probability of death of the applicant (life expectancy of his generation), the probability of leaving a widowed spouse in the event of death, and the estimated number of years that the “potential” widower would receive the pension. Hence, the pension amount is fully linked to the retirement age: the earlier the retirement age, the lower the pension amount.

Contractual and/or Open-Ended Occupational Funds: Contributions and investment returns allow members to accumulate an amount of money that will be available on retirement, or even earlier, if certain conditions are met. Members who were enrolled at least 8 years previously may obtain an advance of up to a maximum of 75% of their individual account balance for the purchase or remodeling of their first home, or that of their children. In addition, up to 30% of the account may be requested for any type of necessity. Furthermore, enrollees may at any time request an amount of money of up to 75% of their balance for extraordinary family-related medical expenses. Members may use one or more of these advance payments within statutory limits. For example, they can use the 30% limit to meet any of the requirements, but they cannot receive more than 45% (30+45=75%) for the purchase of a home. Participants can then refund the money, thus regaining their prior status. Members must meet the minimum age and seniority requirements of the public old age pension scheme on retirement, provided that they have been enrolled in the system for at least five years. It it is worth mentioning that enrollment does not necessarily involve payment of contributions: plan membership qualifies enrolled members for benefits even when no money is paid (for example, if the plan member is unemployed but still meets membership requirements). Fund members have the following alternatives on retirement:

The total individual balance may be converted into an annuity.
Up to 50% of the individual balance can be paid in a lump sum and the difference can be converted into a life annuity.
If at least 70% of the individual balance converted into a life annuity is less than 50% of the public social pension, the member may obtain the total balance as a lump sum.

State guarantee

The new “citizen income” legislation (“Pensione di cittadinanza”) introduced in 2019 has increased non-contributory retirement pension amounts. This consists of a safety net that provides benefits whose right to collection is not based on the prior payment of contributions, but on the personal situation of the recipient (level of income). These pensions have risen from 19% to 24% of the average salary (up to a maximum of 780 euros per month – in the case of unmarried individuals or people living alone – aged 67 or more).

References:

https://www.iopsweb.org/resources/48238257.pdf

https://www.ssa.gov/policy/docs/progdesc/ssptw/2018-2019/europe/italy.html

https://www.pensionfundsonline.co.uk/content/country-profiles/italy

https://www.jubilaciondefuturo.es/es/blog/tribuna-de-fernando-martinez-cue-las-pensiones-de-jubilacion-en-italia-el-sistema-de-cuentas-nocionales.html

Rumania (2008)

Israel (2008)

Laws:

1953 (national insurance), implemented in 1954; 1955 (survivors’ pensions); 1957 (old-age pensions); 1974 (disability pensions); 1980 (income support); 1982 (income support benefits); 1988 (long-term care benefits); 2008 (Mandatory Pension Act establishing a mandatory defined contribution occupational program).

Type of System:

Multipillar scheme comprising a first non-contributory pillar (complementary means-tested income support program); a second contributory pillar in which a universal social insurance (PAYGO) program and a mandatory occupational program coexist; and a third pillar of voluntary personal savings.

Startup:

January 2008 (mandatory occupational defined contribution program)

Managing Agencies:

Pension Fund Management companies and insurance companies may establish supplementary pension schemes and offer them to employers.

Employers are obligated to enroll all their salaried workers in a pension scheme and contributions are mandatory for income up to the average salary. Employers can increase their contributions, on a voluntary basis, and enroll some or all of their employees in such plan. Membership and the promise of contributions in excess of mandatory contributions may be based on agreements between employers and individual workers, or on collective agreements between the company or industry and trade unions.

Workers choose the pension fund management or insurance companies in which they will enroll. Depending on plan rules, employees have considerable options regarding the pensions package that provides different replacement rates for disability, survivors’ and old-age pensions.

More details at: https://ww1.issa.int/node/195545?country=883

Supervisory Agencies:

The Ministry of Social Affairs (https://www.molsa.gov.il) provides general oversight.

The National Insurance Institute (https://www.btl.gov.il) manages the PAYGO program, collects contributions and pays pensions through its branches.

The Capital Market, Insurance and Savings Authority (CMISA; https://www.gov.il/en/departments/units/department_cma) supervises financial services in the private occupational and third pillar, insurance and pension markets. CMISA receives and verifies reports submitted by supervised agencies and may conduct on-site inspections at any time.

Membership:

There are no legal ‘s and regulations governing discrimination in coverage. As of January 1, 2008, the “Pension for Every Worker” laid the foundations for every salaried worker in the economy to be entitled to receive pension contributions from the worker himself and his employer.

As of 2017, the self-employed have had to enroll in a plan in a personal capacity (for the rest – as of 2008).

Mandatory and Voluntary Contributions:

Contributory PAYGO pillar:

Worker: for old-age and survivors’ pensions: 0.22% of salary (if this is less than 60% of the national average salary); and 3.85% of wages (if they exceed 60 per cent of the national average monthly wage); for disability benefits: 0.11% of salary (if it is less than 60% of the national average salary) and 1.86% of salary (if it is greater than 60% of the national average monthly salary; and for long-term care: 0.01% of salary (if this is less than 60% of the national average salary) and 0.14% of salary (if this is greater than 60% of the national average monthly salary).
Employer: for old-age and survivors’ pensions: 1.30% of salary (if less than 60 per cent of the national average wage) and 2.04% of salary (if more than 60 per cent of the national average monthly wage); for disability benefits: 0.26% of salary (if less than 60% of the national average salary) and 0.42% of salary (if greater than 60% of the national average salary); and for long-term care: 0.04% of the salary (if less than 60% of the national average salary) and 0.19% of the salary (if greater than 60% of the national average salary).
State: 0.25% of income (old-age and survivors’ pensions), 0.10% of income (invalidity benefits), 0.02% of income of insured and self-employed individuals (long-term care); the full cost of special old-age and survivorship pensions and long-term care benefits for new immigrants; and the total cost of the mobility grant.

Occupational contributory pillar:

Worker: In the new pension funds, the maximum contribution is 7% of the part of the salary up to twice the national average salary (unlike the general pension funds, in which the maximum contribution is 7% of the salary without a ceiling). The most common contribution rate is 5.5%. If it is up to 5%, the employee and employer contributions must be equal to qualify for tax benefits. Contributions above 5% depend on employee requirements and employment arrangements. Employees must match their employer’s contributions, up to a maximum of 5%.
Employer: The common contribution is 5.5% for retirement savings and 6% for severance pay. The contribution is subject to labor agreements. In the new pension funds, the maximum contribution is 7.5% of the part of the salary up to twice the national average salary (unlike the general pension funds, in which the maximum contribution is 7.5% of the salary without a ceiling). The common contribution is 5.5% for retirement savings and 6% for severance pay. The contribution is subject to labor agreements.

Pensions / Benefits:

– Mandatory occupational contributory pillar: In the case of defined contribution plans, the old-age pension is the product of the accrued amount accumulated by the member at retirement and a factor calculated on the age of the member at retirement, sex and date of birth, annual returns, mortality tables, etc. Early retirement benefits are actuarially reduced.

Benefits must be paid as pensions, but retirees whose pension is less than the minimum pension regulated in the plan’s rules receive the cash value of their accrued entitlements or accumulated capital as a lump sum.

25% of a maximum of five years’ pension may be paid as a lump sum, provided that the reduced pension is not less than the minimum pension defined in the plan’s rules.

If, at the time of retirement, members do not have a spouse or children under the age of 21, they may no longer be covered by the risk of death and receive an increased old-age pension.

– Contributory PAYGO pillar: The basic amount of the old-age pension (at 67 for men male and 62 for women), is ILS 8,804 (approx. USD 2,532) per month.

The maximum income for contribution purposes is five times the basic amount of the old-age pension. The basic pension for the elderly is indexed to prices.

Residents who are not covered by old-age insurance will receive a special means-tested pension equivalent to the basic pension for the elderly.

– Non-contributory pillar: The income supplement is paid if the income, including the old age pension of the PAYGO system, is below the minimum subsistence level. The pension amount depends on the person’s age, marital status, and household size. In 2020, the pensions provided by this supplement ranged between 37% and 75% of the basic old age pension amount per month, depending on age, marital status and number of children.

(Last updated: December 2022)

Kyrgyzstan (2008)

Law: Law of 2008 that creates the individually funded system (Cumulative Pension Fund, CPF) as a complement to the public PAYGO system.

Date Passed: 2008

Type of System: The Kyrgyzstan pension system comprises a first non-contributory social assistance pillar and a second pillar in which a public notional defined contribution system (PAYGO) is complemented with an individually funded system.

Start-up: 2008 (individually funded program)

Managing Agencies: The system as a whole is managed by the State.

Supervisory Agency: The Ministry of Labor and Social Development (http://mlsp.gov.kg ) provides general coordination and oversight. The provincial and county offices of the Ministry of Labor and Social Development manage the programs. The Social Fund (http://socfond.kg ) collects contributions and pays social security benefits.

Membership: Enrollment in the individually funded system is mandatory for dependent, self-employed workers and members of cooperatives and state and collective farms.

Contributions/Assignments: In the public PAYGO system, workers contribute 8% of salary (mandatory pension contributions), and the employer 17.25% (15% corresponds to mandatory pension contributions; 0.25% to employees’ health fund contributions; and 2% to mandatory health insurance contributions). In the individually funded system (CPF) the worker mandatorily contributes 2% of salary (the employer does not make contributions to this system).

Women born before January 1, 1969, and men born before January 1, 1964, are exempt from contributions to the CPF and only contribute 10% to the public PAYGO system.

Pensions/Benefits: The pensions provided by the system [payable on turning 63, with at least 25 years of employment (men) or on turning 58, with at least 20 years of employment (women)], comprise several components: a basic lump sum benefit, a social security component, a notional accounts component, and a mandatory individual account benefit.

The basic lump sum benefit is 1,780 som, or 12% of the national average monthly salary in the last year, whichever is higher.

The social security component is calculated as the insured’s average monthly earnings for 60 consecutive working months multiplied by 1% for each full year of insured employment prior to 1996.

The notional accounts component is calculated as the accumulated contributions (of at least one year) since 1996, divided by 12 months and multiplied by a coefficient based on the life expectancy of the insured’s cohort at retirement age.

The individual account benefit is based on the account balance at retirement.

State Guarantee: The government establishes the payment of a non-contributory welfare pension (not subject to means testing), for all men aged 65 or more and women aged 60 or more, who do not qualify for a means tested old-age pension.

(Last updated: December 2022)

Ghana (2010)

Law: 2008 Law that created the mandatory individually funded occupational system (National Pensions Act 2008, see here)

Date Passed: 2008

Type of System: Ghana’s pension system comprises a first PAYGO pillar complemented by a second mandatory individually funded occupational pillar.

Startup Date: 2010

Managing Agencies: Private Trustees approved by the National Pension Regulatory Authority, with the assistance of fund managers and custodians of registered pension funds, manage the mandatory occupational pension program and collect contributions.

Supervising Agency: The National Pension Regulatory Authority (http://www.npra.gov.gh) provides overall supervision. The Social Security and National Insurance Trust (https://www.ssnit.org.gh) manages the PAYGO social insurance program via a tripartite board of directors, and collects contributions.

Enrollment: Enrollment in the occupational pension system is mandatory for all workers employed in the formal sector, including public sector employees not covered by any special system.

Contributions/Assignments: The total mandatory contribution is 18.5% of the worker’s base salary. The employer contributes 13% of salary and the worker 5.5%. 13.5% of the total 18.5% mandatory contribution rate is paid into Public Pension Scheme (PAYGO system). Of the 13.5% paid into the Public Pension Scheme, 2.5% is transferred to the National Health Insurance System, 11% remains in the Public Pension System, and the remaining 5% is transferred to the mandatory occupational pension system.

Pensions/Benefits:

Old-age pension (social security): 37.5% of the insured’s average annual income in the three highest years of income is paid, plus 0.09375% of the average annual income for each month of contribution that exceeds 180 months.

Early pension: 60% of the old-age pension is paid at age 55, and 90% at age 59.

Pension Adjustments Pensions are reviewed annually and may be adjusted based on the average increase in the salaries of the contributors to the program.

Old-age allowance (social security): A lump sum comprising the total contributions of employees is paid, plus accrued interest. The interest rate is set at 75% of the 91-day Treasury bill rate.

Old-age pension (mandatory occupational pension): a lump sum comprising the total contributions of the employee and the employer is paid, plus the accrued interest.

Early pension: Calculated in the same way as the old-age pension.

(Last updated: December 2022)

Brunei (2010)

Law: Old Age and Disability Pension Act 1955 (amended in 1984); Employee Trust Fund Act of 1992 (TAP); Supplementary Contribution Pension Act of 2009, enacted in 2010).

Approval Date: 2009 (SCP)

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

Startup Date: January 2010 (SCP)

Managing Agencies: The legislation requires the second pillar (SCP and TAP) pension funds to be managed by the Employees Trust Fund Department 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 System). Enrolment in the SCP has been voluntary for workers since January 1, 2010. Enrollment in the SCP and TAP is voluntary for self-employed workers.

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

Pensions/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, may withdraw up to 45% of their funds for the purchase of a home for personal residence; If the person permanently emigrates from the country, the payment of all the accumulated funds in a lump sum is allowed.

SCP: the pension can be accessed from the age of 60 (monthly pension of at least BND 150, approx. USD 107), for up to 20 years, assuming that the retiree has 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 been resident for at least 10 years 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 updated: December 2022)

Malawi (2011)

Law:
Pension Act No. 6

Date Passed:

April 1, 2011

Type of system:

The National Pension Plan (NPS), established in the 2011 Act, comprises two occupational pension programs, one mandatory and one voluntary, both of them with individually funded pension savings accounts. The mandatory occupational pension program comprises a government-managed defined contribution National Pension Fund (NPF) and privately managed, government-licensed pension funds, which may be fully funded defined contribution, defined benefit, or hybrid plans. To meet the mandatory coverage requirement, employees and their employers may contribute to the NPF or one of the licensed private funds.

Note: Civil servants over 35 on June 1, 2017, remain in the Civil Service Pension Scheme (CSPS), a non-contributory defined benefit PAYGO system. Civil servants aged 35 or less on June 1, 2017, were automatically migrated to the NPS.

Managed by:

The mandatory occupational pension program comprises a government-managed defined-contribution National Pension Fund (NPF) and privately managed, government-licensed pension funds.

Supervisory Agency:

The Reserve Bank of Malawi is responsible for the licensing and financial oversight of pension management companies.

Enrollment:

Employers must ensure that all employees are members of the NPF or any other government-licensed private pension fund. I.e., all private sector employees, regardless of where they are employed, must unroll in the occupational pension program. (Previously, only those who worked for employers with more than five employees were mandatorily covered). Civil servants born in 1982 or later, or who were employed in the public sector on or after July 1, 2017, are also mandatorily covered by the program. (Civil servants who were born before 1982 and were employed in the public sector prior to July 1, 2017, are covered by a special pension program). Enrollment in the program is optional for the self-employed.

Mandatory and Voluntary Contributions:

The minimum contribution rate to the NPS mandatory occupational program is 15% of the worker’s gross monthly income. 5 percentage points are contributed by the worker, and the remaining 10 percentage points by the employer. Enrolled self-employed individuals must contribute at least 15% of their covered monthly income.

Pension Options:

Individuals may retire if they meet any of the following conditions: they are 50 years of age, have contributed for at least 20 years, or have a disability certified by a doctor, that prevents them from working. This system provides old age, early retirement, permanent migration, disability and survival pensions.

The regulations currently in force allow up to 50% of the balance of old age occupational pension accounts to be withdrawn as a lump sum on retirement. The remaining portion of the balance must be used to purchase a life annuity, opt for programmed withdrawals, or a combination of these two options. Under certain conditions, members with small account balances may withdraw their entire account balance as a lump sum on retirement.

In permanent migrant pensions, the total balance of employee and employer contributions is paid as a lump sum. The disability pension can be received either as a full withdrawal, or as a life annuity, depending on the account balance. Survival pensions are paid to designated survivors as a lump sum or a life annuity when the enrolled member dies.

State guarantee:

Not applicable

References:

https://www.ssa.gov/policy/docs/progdesc/intl_update/2023-04/index.html#malawi

https://www.iopsweb.org/resources/Malawi-IOPSWebsite-Country-Profile-2022.pdf

United Kingdom (2012)

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

Date Passed: 2008:

Type of System: Multipillar System with a first non-contributory pillar that grants the so-called “Pension credit” of GBP 695 per month (approx. USD 847.49), to low-income members over 65 years of age; a second pillar in which two main systems coexist: (a) single-tier state pension system, STP); (b) a private defined contribution and defined benefit occupational pension system; and a third complementary voluntary savings pillar.

Note 1: in October 2012, automatic enrollment began operating nationwide for all workers not covered by a private occupational pension plan (in the second pillar, private occupational system), for which the government created the National Employment Savings Trust (NEST). Thus, as of that date, workers who do not have an occupational pension plan must choose whether to enroll in a qualified pension scheme provided by their employer, or in the NEST system.

Note 2: there are a variety of schemes in the private occupational pension 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 (benefits are protected by one or more insurance policies or life annuity contracts); (c) personal pension plans, which the worker can negotiate individually with an external provider; (d) “Stakeholder” pension plans, which employers must mandatorily offer their workers (if the company has 5 or more workers and they have not established an occupational or personal 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, financed 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 agencies, such as life insurance companies, credit unions, banks and real estate investment companies.

The NEST automatic enrollment system is directly managed by the NEST Corporation (www.nestpensions.org.uk), which was established by law as a non-departmental public body.

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

Enrollment: Automatic enrollment is mandatory nationwide for all workers 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.

Contributions/Assignments: as of April 2019, the 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)

Pensions/Benefits: Pension fund members have different options for using their accumulated funds on retirement: (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 called “Pension credit” of GBP 695 per month (approx. USD 847.49 per month), to low-income individuals over 66 years of age (information as of 2020)

(Last updated: December 2022)

Honduras (2016)

Law: Social Security Framework Law (LMPS), Decree 56-2015

Date Passed: May 7, 2015

Type of System: The LMPS establishes a legal framework comprising a Social Security system with a multi-pillar structure, providing coverage for contingencies arising from major risks. The law establishes two pension system regimes:

Regime 1 (Basic Social Security): Non-contributory, aimed at the poorest and most vulnerable sector. This regime grants: (a) Monetary social transfers, and/or in kind; (b) goods and services (health, water, sanitation, education, food, social housing, recreation, generation of employment and financial inclusion)

Regime Financing: Through a solidarity and Social Security fund. Most noteworthy: (a) 20% of all rates of new concessions granted by the State after promulgation of the law; (b) 15% of the returns of non-financial investments under concession by the State to social security agencies; (c) there are additional contributions in the general budget of the Republic that are less than 20% of the total amount of the sales tax (ISV) collected in the previous year; (d) All monies will be deposited in a trust fund in the Central Bank of Honduras.

Regime 2 (Social Security Insurance): Ensures means of subsistence in cases of disability, old age and death (IVM). It comprises two pillars: (a) a collectively funded pillar (PAYGO); (b) A complementary individual accounts pillar (CCI).

Financing: (a) Collective funding: minimum contribution of 6.5% (3.5% employer, 2.5% worker 2.5%, 0.5% State, based on a ceiling of one minimum wage;) (b) Complementary individual accounts: subject to the provisions of the Honduran Institute of Social Security (IHSS) Law.

Start-up: 2016

Managing Agencies: The Pension Fund Managers (AFPs) manage the CCI pillar. The Honduran Social Security Institute (IHSS) manages the collective funding of the system (PAYGO).

Supervising Agency: The Ministry of Labor and Social Security (http://www.trabajo.gob.hn/) provides overall supervision. The National Banking and Insurance Commission (CNBS) (http://www.cnbs.gob.hn/) provides financial supervision.

Enrollment: Enrollment in the individual accounts program (CCI) is mandatory for salaried workers of public and private sector companies, civil servants, forestry workers, most agricultural workers and apprentices, with monthly incomes above 10,282.37 lempiras. Enrollment is voluntary for individuals with monthly incomes of up to 10,282.37 lempiras.

Pension Modes: In the individual accounts program, the total balance can be paid as programmed withdrawal or as a lump sum.

There is an early retirement option: up to the full account balance, minus an early retirement fee, can be paid as programmed withdrawal or as a lump sum.

State Guarantee: See Regime 1 (Basic Social Security).

(Last updated: December 2022)

Türkiye (2017)

Laws:

1964 (social insurance), implemented in 1965; 1971 (self-employed); 1983 (Social Insurance for Agricultural Employees), implemented in 1984; 2006 (social security institution); 2006 (Social Security and General Health Insurance), implemented in 2007 and 2008; 2008 (social security); and 2016 (automatic enrollment program, OKS).

Type of System:

The pension system comprises a first non-contributory pillar focused on the lower income sectors; a second mandatory contributory pillar in which a PAYGO and an occupational scheme coexist; and a third private voluntary savings pillar with personal voluntary savings plans and an automatic enrollment program (OKS, for its acronym in Turkish).

Startup:

January 2017 (automatic enrollment program, OKS)

Managing Agencies:

Pension funds are managed by portfolio management companies licensed by the Turkish Capital Markets Board. Pension Funds pay a commission to portfolio management companies for their management services.

The regulations set specific limits to avoid the concentration of pension fund investments. Pension funds are also classified in accordance with the assets they invest in. Each fund category has different limits set by the Turkish Capital Markets Board. Participants are completely free to choose the fund in which they are going to invest and are entitled to switch funds 6 times a year.

In employer-sponsored group pension contracts, employers determine the pension funds through which contributions are invested until the end of the acquisition period. However, if defined in the pension contracts, employers can transfer the use of fund switching rights to employees.

There are different types of pension funds classified according to the financial instruments they are invested in. Pension funds are managed by portfolio management companies in accordance with the rules and regulations governing the pension funds.

Supervisory Agencies:

The Ministry of Labor and Social Security (https://www.csgb.gov.tr/) provides general oversight of the pension system

The Social Security Institution (http://www.sgk.gov.tr/) collects contributions and manages the PAYGO program.

The institutional framework of the OKS program is as follows:

– Undersecretary of Finance: Enforces regulations and efforts to improve the system; oversees pension fund transactions.

– The Turkish Capital Markets Board (SPK; www.spk.gov.tr): Regulates pension funds, portfolio management companies and contracts with these companies and custodians.

– Pension Monitoring Center (EGM, www.spk.gov.tr): Control mechanism and monitoring tool authorized by the Undersecretary of Finance for performing all functions related to system oversight.

– Settlement and Custody Bank ISE (Takasbank, www.takasbank.com.tr): Keeps pension assets safe. Takasbank’s main functions are: To provide a suitable environment for clearing and settling asset buying and selling operations for the fund; keep records of participants’ shares in funds; ensure the management of the fund’s portfolio in accordance with the rules established by the SPK, among others.

Membership:

– PAYGO Program: Mandatorily covers employed individuals, including civil servants, the self-employed, and full-time domestic workers. Exclusions: Part-time domestic workers.

– OKS Program: This program requires all public and private sector employers to enroll their employees in private pension plans. This was done gradually according to company size: it started in January 2017 for companies with more than 1000 workers; in April 2017 for companies with between 250 and 999 workers, and so on until including the smallest companies as of January 2019.

Only employees under the age of 45 were eligible for OKS until 2021. However, as of 2022, employees aged 45 and over can now choose to enroll in the OKS by notifying their respective employers.

Younger workers are automatically enrolled by their employers when they start working but may choose not to participate in the program within 2 months of enrollment.

Mandatory and Voluntary Contributions:

– PAYGO program: workers contribute 9% of gross salary; employers 11% (total: 20%). The maximum monthly income used for the calculation of contributions is 7.5 times the gross official monthly minimum wage.

– OKS Program: In this program, employers select pension plans and collect contributions on behalf of their employees, who must contribute at least 3% of their gross salary (employers’ contributions are entirely voluntary). The State also makes a matching contribution equivalent to 30% of the annual contributions of participants (in 2022, the maximum government contribution is 18,014.40 lire [approx. USD 1,293]). Participants lose between 40% and 100% of state contributions (depending on the number of years of contributions) if they opt out of the program for reasons other than retirement, disability, or death. Finally, the State contributes 1,000 lire (approx. USD 72) for OKS participants after 2 months of participation and 5% of the account balance upon retirement (if the balance is sufficient, it is used to purchase a life annuity for at least 10 years).

Pensions / Benefits:

– PAYGO program:

To access the old-age pension, men must be 60 years old (and progressively up to 65 from 2036 to 2044) and women 58 (progressively until the age of 65 from 2036 to 2048) with at least 7,200 days of contributions (9,000 days for civil servants and the self-employed); men must be 63 (progressively until the age of 65, from 2036 to 2044) and women 61(progressively until the age of 65 from 2036 to 2048) with at least 5,400 days of paid contributions.

The old-age pension is the average monthly income of the insured person multiplied by the rate of accumulation or accrual. Average monthly income is the total income of the insured divided by the total number of days of contributions paid, multiplied by 30.

The accrual rate is 2% for 360 days of contribution (reduced proportionally for periods less than 360 days), up to 90%. A special calculation applies if one was insured for the first time before October 1, 2008.

– OKS Program:

Participants are entitled to retirement if both of the following conditions are met: reaching the age of 56; and having been in the pension system for at least 10 years.

The OKS is a defined contribution program. Pensions can be received as a lump sum, in programmed withdrawals, or pensioners can buy a life annuity. One can also choose a combination of these options.

(Last updated: December 2022)

Armenia (2018)

Georgia (2019)

On September 1, 2018, Georgia’s government approved the Accumulated Pension System (APS). The government created the new mandatory individual accounts program to complement the existing fixed-rate universal old-age state pension, promote capital market development and stimulate economic growth. Currently, there are no qualified retirement schemes or tax incentives for retirement savings in Georgia, and the state pension provides only a subsistence-level benefit (currently, 180 tlari [USD 69] per month).

Other key features of the APS include:

– Coverage: The APS covers citizens and non-citizens who work in the public or private sector, or are self-employed. It is mandatory for workers under 40. All workers under the age of 60 are automatically enrolled in the new program. Employees who were 40 years of age or more on September 1 can opt out of APS within 5 months of the program’s implementation date. All self-employed individuals can also opt out.

– Funding: To fund individual accounts, employees and employers each contribute 2% of gross monthly wages up to 60,000 tlari (USD 23,000), and the government contributes 2% of gross monthly wages up to 24,000 tlari (USD 9,200) plus 1% of gross wages between 24,000 and 60,000 tlari. The total contribution rate for most wage earners is 6% of gross monthly wages. Self-employed individuals must pay employee and employer contributions.

– Benefits: members who reach the official retirement age of 65, for men, or 60, for women, can withdraw the entire balance from their accounts as a lump sum or convert it to a monthly annuity. Withdrawals from the account balance are also allowed when members are assessed with a permanent disability or die, leaving the balance to designated heirs.

– Investments: members can choose between three types of funds with different levels of risk (low, medium and high). Members who do not choose a fund will be placed in a predetermined fund based on age: members under the age of 40 will be placed in a high-risk fund, those between 40 and 50 in a medium risk fund, and those over 50 in a low-risk fund.

– Administration: The newly established Georgia Pensions Agency (PA) is responsible for the overall administration of the APS. An Investment Board within the PA conducts risk assessments, oversees the mix of contributions received, and issues regulations governing investments and the selection of companies that manage APS accounts. The National Bank of Georgia and a Supervisory Board provide additional oversight to APS.

Source: https://www.ssa.gov/policy/docs/progdesc/intl_update/2018-10/index.html#georgia

(Last updated: December 2022)

Poland (2019)

Law governing the quasi-mandatory scheme (automatic enrollment):

PPK Act of 2019

Year in which the quasi-mandatory (automatic enrollment) scheme started operating:

2019

Type of system:

The pension system comprises 3 pillars:

(a) First pillar: Public PAYGO notional accounts (NA) system. Minimum pensions require an “insurance period” of a certain number of years, which can be verified with contributions, years of study in higher education and periods of illness or rehabilitation.

(b) Second pillar:

Voluntary individual savings system (OFE) since 2014. Contributions of 19.5% are paid into the NA system by default, and contributors can voluntarily choose to assign 2.92 percentage points of these contributions to OFE.
Individually funded occupational savings system with mandatory enrollment (PPK; mandatory for employers and voluntary for employees, because they can opt out if they wish to).

(c) Third Pillar: Employer-funded Voluntary Collective Occupational Savings Plans (EPPs) and Individual Savings Plans with Tax Benefits: IKE (allow tax-exempt capital gains) and IKZE (allow amounts deposited during the year to be deducted from the taxable base income).

Supervisory Agency:

The Polish Financial Supervision Authority and the Ministry of Family, Labor and Social Policy, which provides more general supervision, are responsible for all oversight.

Context and brief description of reforms over time:

There was a defined-benefit PAYGO system in Poland until 1998. The social security system’s finances have been seriously affected by the population aging observed since the mid-1990s. As a result of the so-called “great pension reform,” the DB system was replaced by a DC system in 1999. The first pillar at the time was a notional accounts (NDC) system managed by the Social Security Institute (ZUS). The second pillar was a mandatory individually funded savings system, in which contributions were transferred through the ZUS to the privately managed open pension funds (OFE). Under this new system, 12.22% of contributions went to the first pillar, and 7.3% to the second pillar. However, after a series of contribution rate changes, the contribution rate to the OFEs was 2.92% in 2014. This was followed by several fundamental changes that would end up altering the functioning of the system: people were forced to transfer a large part of their funds from the OFEs to the ZUS and voluntary participation in the OFEs was incorporated. It was agreed that 10 years before reaching retirement age, the funds in the OFE would be gradually transferred to an account in the ZUS, supposedly to limit their volatility.

The third pillar comprises additional forms of savings for old age. The employer-funded collective occupational employee pension scheme (EPP) was established in 1999. In 2004, the possibility of voluntary individual retirement savings was introduced through Individual Retirement Accounts (IKE) and Individual Retirement Security Accounts (IKZE).

Enrollment in the quasi-mandatory scheme (automatic enrollment):

Automatic enrollment in the PPK is mandatory for people between 18 and 55 years of age, while those between 55 and 70 years of age can opt-in voluntarily. Participants may opt out at any time by informing their employer in writing. Employees must be re-enrolled in the PPK by their employers every four years.

Mandatory and Voluntary Contributions to the quasi-mandatory scheme (automatic enrollment):

The basic contribution rate financed by workers is usually 2% of salary, which can be reduced to 0.5% for those with lower incomes. The employer contributes a basic amount of 1.5% of workers’ salaries. Employers and workers can agree to increase their contributions to a maximum of 4% each, thus totaling 8%. The State also contributes to the accounts, regardless of the worker’s salary, with a welcoming contribution of PLN 250 (USD 59) after three months of contributions, and an annual contribution of PLN 240 (USD 57) if some requirements are met.

Pension Options and Access Requirements:

NDC PAYGO System:

The system grants old age pensions (early, or at the official retirement age), as well as disability and survival pensions.

The official retirement age for accessing an old-age pension is 65, with at least 25 years of contributions, for men, and 60, with at least 20 years of contributions, for women. Years with no contributions must not be more than 33% of the number of years of contribution. The early retirement age is five years less than the official retirement age for men with at least 35 years of contributions (25 years if they cannot work), and for women with at least 30 years of contributions (20 years if they cannot work). The guaranteed minimum pension can be accessed if the old-age social security pension is lower than the minimum monthly old-age pension and the retirees meet the requirement of at least 25 years of contribution, in the case of men, and 20 years, in the case of women.

Men can access the old-age pension (NDC) at 65, and women at 60, by meeting the requirement of having contributed at least one day.

The guaranteed minimum pension can be accessed if the old-age social security pension is lower than the minimum monthly old-age pension and the retirees meet the requirement of at least 25 years of contribution, in the case of men, and 20 years, in the case of women.

The social security disability pension can be for total or partial disability.

The Social Security survivor’s pension for an individual survivor is 85% of the old-age or disability pension that the deceased received or was entitled to receive; 90% divided equally between two survivors; and 95% divided equally between three or more survivors.

Automatic enrollment system in PPK:

25% of the funds can be accessed in case of serious illness, and 100% can be withdrawn to finance a mortgage until the age of 45. Saved funds can be withdrawn as a lump sum, or as a programmed withdrawal, at the age of 60.

State guarantee:

In the NDC PAYGO system, the government covers the cost of the minimum guaranteed pension by paying pension contributions to insured individuals who are on leave to care for their children or receiving maternity benefits, to individuals receiving unemployment benefits, and to unemployed graduates.

Further information:

Please review this profile/infographic prepared by Pension Research&Consulting, which reviews the basic functioning of each pillar of the Polish pension system in detail.

Philippines (2021)

Laws:

1954 (social insurance for old age, disability and survival); 2010 (non-contributory social pension); 2021 (Workers’ Investment and Savings Program [WISP]).

Type of System:

Multi-pillar scheme consisting of a first non-contributory pillar (social pension program) with means testing; a second contributory pillar in which a social insurance PAYGO program and a mandatory pension savings program (Workers’ Investment and Savings Program, WISP, launched in 2021) are complemented; and a third voluntary savings pillar.

To qualify for a social security old-age pension, a person must have reached the official retirement age of 60, have at least 10 years of contributions and have stopped working (if under 65 years of age). Individuals who have reached the official retirement age, but do not qualify for the social insurance pension, may receive the means-tested non-contributory social pension, if the National Household Means Testing System for the Reduction of Poverty qualifies them as poor.

Startup:

January 2021 (Workers’ Investment and Savings Program [WISP], a mandatory individually funded program)

Managing Agencies:

The WISP is managed by the Social Security System (SSS, https://www.sss.gov.ph/).

Supervisory Agencies:

The Social Security Commission, comprising a tripartite Board of government representatives, employers and workers, is responsible for overall supervision, management and regulation.

The Social Security System (https://www.sss.gov.ph/) collects contributions and pays the PAYGO social security program’s pensions.

The non-contributory social assistance program is managed by the Department of Social Welfare and Development (https://www.dswd.gov.ph).

Membership:

-PAYGO program: mandatory enrollment for private sector employees, self-employed workers and domestic workers. Voluntary coverage for Philippine citizens working abroad, people who previously had mandatory coverage, and spouses of insured individuals who are not working. There are special systems for civil servants and military personnel.

– WISP Program: All private sector employees, self-employed workers, overseas Filipino workers, and volunteer members who: (i) Have no pension in the PAYGO social insurance program; (ii) have PAYGO social insurance program contributions; and (iii) have a monthly salary that exceeds PHP 20,000 (approx. USD 349).

Mandatory and Voluntary Contributions:

In the PAYGO program, employees contribute 4.5% of their gross monthly salary and employers contribute 8.5% to any of 45 income classes (employee and employer contribution rates are gradually increasing and will reach 5% and 10%, respectively, in 2025). A portion of the contributions of workers in the top 10 income classes (those with monthly wages above PHP 20,000 [USD 412]), will be allocated to the WISP. In 2021, employers´ contributions to WISP ranged from PHP 42.5 (USD 0.88) to PHP 425 (USD 8.75) per month and employees´ contributions ranged from PHP 22.5 (USD 0.46) to PHP 225 (USD 4.63) per month, depending on the gross monthly salary of workers.

Pensions / Benefits:

– PAYGO program: The pension is the largest among: PHP 300 (approx. USD 5.23) plus 20% of the insured’s average monthly covered income and 2% of the average monthly covered income for each year of proven service over 10 years; 40% of the insured’s average monthly covered income; PHP 1,200 (approx. USD 20.92) with at least 10 but less than 20 years of proven service; or PHP 2,400 (approx. $41.84) with at least 20 years of proven service.

Average monthly covered earnings are the sum of the insured’s last 60 months of covered earnings immediately prior to the six-month period (January-June, April-September, July-December or October-March) in which the pension is first paid, divided by 60, or the sum of all monthly covered earnings paid prior to the six-month period (January-June, April-September, July-December or October-March) in which the pension is first paid, divided by the number of monthly contributions paid in the same period, whichever is greater.

Proven years of service of the insured are the total number of months of contributions of the insured divided by 12 for contributions since 2002; each year in which the insured has at least six months of contributions from 1985 to 2001; 1985 minus the year in which the insured began to pay contributions prior to 1985.

The minimum monthly income used to calculate pensions is PHP 1,000 (approx. USD 17.43); PHP 5,000 (approx. USD 87.16) for voluntarily insured foreign workers.

The maximum monthly income used to calculate pensions is PHP 16,000 (approx. USD 278.93).

There is no maximum monthly old-age pension.

Partial lump sum: The insured may choose to receive the first 18 months of pension payments (not including dependent supplements and the 13th pension payment in the first year) as a lump sum.

Dependent supplement: 10% of the old-age pension or PHP 250 (approx. $4.36), whichever is greater, is paid for each eligible child.

Payment schedule: 13 payments per year.

Pension Adjustment: Pensions are adjusted ad hoc based on changes in prices and wages and the financial health of the system, subject to approval by the Social Security Commission.

– WISP: On retirement, a fund member’s total accrued assets are converted into an annuity or life annuity paid for at least 15 years. In the event of the death of a fund member, the total balance of the member’s account is paid as a lump sum to the designated beneficiaries. Early withdrawals from WISP accounts are not allowed.

(Last updated: December 2022)

Gibraltar (2021)

Law:

Private Sector Pensions Act 2019

Date Passed:

2019

Type of System

Comprises a public PAYGO system and a private savings system with automatic enrollment.

Started operating:

August 1, 2021

Managed by:

The Gibraltar Financial Services Commission (GFSC) is responsible for pension fund management and regulation.

Supervisory Agency:

The Gibraltar Financial Services Commission (GFSC) appoints the Pension Commission (PC), which enforces compliance with pension law requirements by employers and fund managers. (https://www.fsc.gi/)

Enrollment:

Enrollment in the new individual accounts pension scheme is mandatory. Employers must enroll their employees aged 15 or older, continuously employed for at least 1 year, with annual gross income of at least £10,000 (USD 12,031) in approved occupational pension schemes. Automatic enrollment is gradual, depending on the size of the company. As of August 1, 2021, it was mandatory for companies with 251 employees or more; as of July 1, 2022, for companies with 101 to 250 employees. As of July 1, 2025, it will be mandatory for companies with 51 to 100 employees; as of July 1, 2026, for companies with 15 to 50 employees, and as of July 1, 2027, for companies with 14 or fewer employees.

Mandatory and Voluntary Contributions:

The contribution rate for the mandatory PAYGO social insurance program is 10% of covered weekly earnings for employees, and 20% for employers. In the private savings system, employees and employers must contribute at least 2% of their weekly or monthly income to occupational pension plans.

Pension Options:

To access the full old-age pension (state pension) under this program, men must be 65 years of age, with at least 2,250 weeks of contributions, and women must be 60, with at least 2,000 weeks of contribution.

Men who have reached the official retirement age, but do not qualify for a full pension, may opt for a partial old-age pension, provided they have at least 585 weeks of contributions; women who have reached the official retirement age may do so with 520 weeks of contributions.

The full monthly old-age pension is currently £463.75 (USD 557.96), and the minimum monthly old-age pension is £120.35 (USD 144.80).

State Guarantee:

Not applicable

Greece (2022)

Laws:

1951 (social security), 1960 and 1978 (legislation and regulation), 1990 (regulation), 1991 (pensions), 1992 (social security), 2000 (financing and management), 2002 (social security), 2004 (social security), 2008 (social security), 2010 (social security), 2011 (social security), 2012 (pensions), 2012 (fiscal strategy), 2015 (pensions), 2016 (pension reform); 2016 (social security coordination); and 2021 (Hellenic Auxiliary Pensions Defined Contribution Fund, TEKA).

Type of System:

The pension system comprises a first means-tested non-contributory pillar; and a second pillar in which main and auxiliary pension programs coexist.

In the second pillar, the main programs include a universal component (“National Pension”) for permanent residents of Greece who meet certain contribution requirements, and an income-related “Social Insurance” component for people employed in industry, commerce and related occupations; self-employed individuals; agricultural workers; public sector employees; and certain other categories of persons. Second-pillar ancillary programs are linked to major programs and share most of the same eligibility criteria.

Regarding ancillary programs, on September 2, 2021, parliament passed a law creating the “Hellenic Auxiliary Pension Defined Contribution Fund” (TEKA), a new mandatory individual accounts program for those entering the workforce for the first time as of 1 January 2022. This new program replaces the current mandatory notional PAYGO program [the so-called “Unified Auxiliary Fund for Social Security and Global Benefits” (ETEAEP)] Workers currently covered by the ETEAEP who were under the age of 35 on January 1, 2022, had the option of transferring to the TEKA program from January 1, 2022, to December 31, 2022; those who were 35 or older on January 1, 2022, had to remain in the ETEAEP program.

Startup:

January 2022 (Hellenic Auxiliary Pension Defined Contribution Fund, TEKA)

Managing Agencies:

TEKA is managed by a Board of Directors comprising seven qualified, expert members. Board members are selected in an open, transparent, and merit-based process described in detail in the regulations (Art. 12 of Law 4826/2021).

The Board of Directors sets the guidelines for the Fund’s investment policy and determines the key features of the investment schemes.

Until the first Board of Directors is constituted, for a period not exceeding twelve (12) months from the enactment of the law, the Fund shall be managed by a seven-member Temporary Steering Committee. The Temporary Steering Committee was established by Ministerial Agreement as a transitional management body, to ensure the start-up and proper functioning of the Fund during its creation. The Temporary Steering Committee carries out the preparatory work necessary for the constitution of the first Board of Directors and the recruitment of the first Director General, and draws up the Organizational Structure and Regulations necessary for the operation of the Fund.

Supervisory Agencies:

The Ministry of Labor and Social Security (http://www.ypakp.gr/) provides oversight of all schemes, including TEKA.

The Unified Social Security Fund (EFKA) (http://www.efka.gov.gr/), managed by a governor and board of directors, collects contributions and manages most programs.

Membership:

TEKA: As of 01.01.2022, all individuals entering the labor market, regardless of age, are subject to the TEKA for their ancillary insurance if they are employed in an industry for which there is mandatory additional insurance. These include public and private sector employees, as well as freelance engineers and lawyers.

As of 01.01.2023 the following individuals have the option of taking out TEKA insurance:

Insured persons in the supplementary insurance branch of e-EFKA (formerly ETEAEP), born on or after 01.01.1987, who wish to switch from said branch to TEKA. The respective insured individuals can assert their right to be included in the TEKA insurance until December 31, 2023.
Workers who are employed in sectors for which there is no mandatory additional insurance.

Mandatory and Voluntary Contributions:

Income-related pension (social insurance): 6.67% of the worker’s salary; 13.33% from the employer (total 20%).

TEKA: Employees and employers each contribute 3.25% (reduced to 3% in June 2022) of the gross monthly salary up to EUR 6,630 (approx. USD 6,858).

Pensions / Benefits:

-National pension: This pension is not related to income and is financed directly from the State budget. The minimum requirements are 15 years of contributions and 15 years of residence in the country. The total amount of the national pension is EUR 384, corresponding to 20 years of insurance and 40 years of residence in Greece from the age of 15 to the age limit required to receive the pension. The total amount is reduced by 2% for each year not exceeding 20 to 15 years of insurance (the national pension for 15 years is EUR 345.60). This amount is reduced by 1/40 for each year of residence of less than 40 years.

– Income-related pension: This is the contributory pension, which is calculated on the basis of the years of insurance and taxable income during working life, specifically from 01.01.2002 until the date of the retirement application. There is a variable accumulation rate of 0.77% for each year up to 15 years, which gradually increases to 2.55% for years 36 to 40, and beyond year 40 it is reduced to 0.5%. Past earnings are inflated with the change in the average annual Consumer Price Index until 2024, and from 2025 onwards with the annual change in wages. The ceiling for pensionable income is EUR 6,500 (approx. USD 6,723) per month. The supplementary insurance is public and mandatory, managed on a PAYGO basis.

– TEKA: For participants with at least 15 years of contributions, a life annuity is paid based on the participant’s account balance at the time of retirement. For those with less than 15 years of contributions, a lump-sum benefit is paid based on total employee and employer contributions (adjusted for inflation and excluding returns on investment).

(Last updated: December 2022)

Belarus (2022)

Laws:

1992 (pensions); 1996 (contributions); 2001 (funeral allowance); 2003 (public service); 2008 (occupational pensions), implemented in 2009; 2016 (pension improvement); and 2021 (new voluntary individual insured pension accounts system).

Type of System:

The pension system consists of a first non-contributory pillar financed by general taxes, focused on people who do not receive a pension from the public PAYGO system, are not working, and meet the age requirements (65 for men and 60 for women); a second mandatory contributory PAYGO pillar; and a third voluntary private savings pillar with personal voluntary savings plans and a voluntary savings program supported by tax incentives and co-financed with the partial allocation of the contributions that employers pay into the PAYGO system (new voluntary individual insured pension accounts system).

Startup:

October 2022 (new voluntary individual insured pension accounts system)

Managing Agencies:

Accounts may be managed by Stravita (a state insurer with about two-thirds of the market) and Priorlife (a private insurer).

Supervisory Agencies:

The Ministry of Labor and Social Protection (http://mintrud.gov.by/) manages the programs through its local offices.

The Population Social Protection Fund (http://www.ssf.gov.by/) of the Ministry of Labor and Social Security collects contributions and manages the PAYGO program.

Membership:

PAYGO program: Mandatory coverage of dependent and self-employed workers permanently residing in the country, including priests and employees of religious organizations; members of cooperatives and farmers. There are special systems for individuals working under certain hazardous conditions, certain categories of individuals in professional activities, government employees, military personnel and individuals injured in the Chernobyl disaster.

– New voluntary individual insured pension accounts system: Voluntary enrollment of individuals covered by the PAYGO system, open to all employees at least 3 years below the official retirement age (63 for men and 58 for women, as of 2022). Account holders may suspend membership or change contribution rates at any time.

Mandatory and Voluntary Contributions:

PAYGO program: 1% of the gross wages of the worker and 28% by the employer (total: 29%).

– New voluntary individual insured pension accounts system: Employees will have the option to contribute up to 10% of gross salary (in addition to the employee’s current contribution rate of 1% for the PAYGO system) which will be tax deductible. Employers will also match the employee’s contribution, for up to 3% of gross salary (this percentage will be allocated from the employer’s total contribution to the PAYGO system on behalf of the worker, 28%). Thus, for example, if a worker decides to contribute 4% of his salary to this new voluntary scheme, the employer must contribute 3% (total: 7%); this means that 26% of the salary is allocated to the PAYGO system [1% by the worker and 25% (28%-3%) by the employer].

Minimum guaranteed return: The minimum guaranteed rate of return on employee/employer contributions will be equal to the central bank refinancing rate, currently 9.25% per annum.

Pensions / Benefits:

– PAYGO program:

To access an old-age pension, people must have reached the official retirement age and have at least 25 years or 20 years of coverage (men and women, respectively), including at least 18 years of paid contributions (men and women; gradually increasing by 6 months per year to 20 years by 2025). Partial pensions can be accessed at the official retirement age if the insured does not meet the coverage requirements for the full pension.

The monthly old-age pension is 55 per cent of the insured person’s average monthly income plus 1 per cent of the average monthly income for each year of coverage in excess of 25 years (men) or 20 years (women). An additional 1% of the insured person’s average monthly income is paid for each year of coverage that exceeds 10 years (men) or 7.5 years (women) in hazardous working conditions, up to a total of 20%.

The minimum monthly income used to calculate the pension is 1% of the minimum monthly old-age pension. The minimum monthly old-age pension is 25 per cent of the national average subsistence pension for the last two quarters.

– New voluntary individual insured pension accounts system: On retirement, participants may choose to receive a tax-free annuity or monthly life annuity, paid for 5 or 10 years. If the participant dies, eligible survivors may inherit the assets remaining in the individual account.

(Last updated: December 2022)

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