PensionReforms' summary and comments
South America (particularly Chile) was the birthplace of the modern, mandatory retirement saving scheme.  We now have 26 years' experience in Chile's case and the news generally seems not that great in this analysis of coverage data from 17 Latin American countries.
Here are some of the highlights:

·   Less than 40% of the labour force made regular contributions in the mid 2000s in 11 of the 15 countries. This is partly caused by high unemployment and low participation of self employed workers, but even amongst salaried workers, there are nine countries with rates at 50% or below.

·   Problems are higher in the primary sector and small firms, where coverage is "almost non-existent" in most covered countries. Even in Chile, the coverage rate amongst "small" firms is less than one third.  Generally, manufacturing and services sectors are better, and large firms (50 workers or more) have higher rates.

·   As expected, coverage is high among public sector employees. However, in most countries this rate is far from 100%.  In some cases, as Peru, Nicaragua, Guatemala, and Argentina, it is below 80%, showing that compliance problems also affect the public sector.

·   Poor workers have little or no participation.  In 13 of the 15 countries, coverage of the lowest quintile was below 20%, while the rates for the highest quintile were much larger. This inequity in access has increased since the 1990s in countries with high coverage and declined in those with lower coverage.

·   The low coverage of public pensions affects more seriously those living in rural areas, the poorest and the least educated.

·   Four countries (Chile, Argentina, Uruguay, and Brazil) have significantly higher coverage rates, at 60% or higher.

·   The trends in elderly coverage have been mixed since the 1990s. Ten countries had small increases in rates, while six countries had declines.

"Coverage of pension systems has slowly become a central issue in the policy debate in the region. After more than a decade of reforms and debates, the central problem of the pension systems in Latin America (how to protect most workers and their families from the economic risks caused by aging and retirement from the labor force) remains unsolved in countries were structural reforms were implemented, as well as in countries where reforms were limited to parametric adjustments and countries where no significant reforms were adopted. Proposals and debates over the last decade have been shaped by ideological positions and objectives that were not always related to the central goals of the programs, and should not be the driving force to shape the social security systems."

The report notes that the data need improvement to ensure the countries can be compared on a like basis.  It discusses some of the ways that some of the data biases occur and how they might be overcome.  For example, counting all the members of compulsory schemes isn't an accurate way of measuring coverage because of duplications.  The proportion of "affiliates" to the workforce in Chile, for example, reached 100% in 1995 and seems to have levelled out at about 118%.  The number actually contributing (the report's preferred measure) is a bit over half that number.   One might have expected good information to be one of the positive aspects of a compulsory regime but there seems some way to go in many of the countries covered.

PensionReforms notes that partially successful "compulsory" regimes have the potential to make things worse for the poor, the unemployed, the underemployed and the unmanageable.  That's because inequities that are apparent during working lives are magnified in retirement where the incomes are a function of what happened when they were working and were supposed to be saving.  Countries can easily end with a complex, expensive, partial, privatised system and a complex income-tested public system - surely the worst of all worlds.  If a country cannot force even public servants to contribute to the compulsory scheme, what possible hope might there be for compliance amongst those in the private sector?

Perhaps the state should focus on achieving what only it can do - the prevention of poverty amongst the elderly and leave the private sector to do what it is best at - providing commercial, consumption-smoothing facilities that live on top of whatever the state might do.  Mixing the two runs the risk of missing both targets.  The coverage data from Latin America seem less than encouraging, even from Chile, compulsion's poster child.  (file size 1.11 MB) 158