Don't Patronize Chile's Pensions
The article "Wait a minute--these eggs are cracked" (International Business, Dec. 18) alleges that the "nest eggs are cracked" in Chile's pension system: You must be yolk-ing or at least a little scrambled.
For 15 years, the Chilean pension system has had an average annual real return of 13.3%. "Generation X" workers in the U.S. Social Security system, by contrast, can expect a negative return on their money every year until they retire.
The system in Chile currently manages capital equal to half of the gross domestic product, has been untainted by theft or corruption, has zero unfunded liabilities, has never imposed any hike in contributions, is paying pensions equivalent to 70% of final salary that are permanently indexed to inflation, includes survivor and disability insurance, guarantees a minimum pension to low-income workers, is fully portable to allow labor-force mobility, and permits each worker free choice as to which pension-fund manager will administer his or her individual savings account, among many other features.
It is easy to see why the Chilean system is frequently identified as the best national pension system in the world and why the model is being poached by numerous countries. For this and future generations, the Chilean pension system is sunny-side up. And that's no joke.
Mark M. Klugmann
International Center for Pension Reform