We could learn a thing or two from Chile’s experience
For the most part, the privatization of worker’s pension in Chile has been declared a success…but has it really? Has anybody bothered to ask those contributing to their retirement accounts?
Widespread disenchantment and disapproval seems so exist as these companies who administer these pensions charge fees…these fees sometimes are excessive and unjustified and when the contributor realizes that he could have put his money in the bank and done a lot better, then the whole issue takes a different perspective.
Now that the first generation of workers to depend on the new system is beginning to retire, Chileans are finding that it is falling far short of what was originally advertised under the authoritarian government of Gen. Augusto Pinochet.(1)
“Chilean workers put at least 10% of their wages into a private investment account. They are allowed to invest up to 20% and can tailor their investment to support early retirement. They choose between several conservatively managed and regulated pension funds.
The system is managed by competitive private companies called AFPs (from the Spanish for pension fund administrators). Each AFP operates the equivalent of a mutual fund that invests in stocks, bonds, and government debt. The AFP is separate from the mutual fund; so if the AFP goes bankrupt, the assets of the mutual fund--that is, workers' investments--are not affected. The regulatory board takes over the fund and asks the workers to change to another AFP. Not a dime of the workers' money is touched in the process. Workers are free to change from one AFP to another. That creates competition among the companies to provide a higher return on investment and better customer service, or to charge lower commissions.
The success of this program is astonishing! We in America receive the benefit of a 1-2% return on our Social Security investment. Future generations of Americans will likely get even less, if the program works at all. In Chile private social security accounts have averaged a 9.23% return on the investment. The Chilean model buys a lot greater security...housing, food, medicine, care...for Chiles aging population while ensuring a much smaller burden will fall on the shoulders of younger generations.
Read all about the Chilean plan in a paper written by its creator, Jose Pinera of CATO. Then share the information with friends and relatives.
HT: Investors.com
Did you catch that dear follower? It was written by José Piñera who is the Co-chairman, Project on Social Security Choice of the CATO INSTITUTE yes, the very outfit that we all know as a radical, right-wing think tank.
However, here in America I am almost sure that there will be loopholes, special consideration given to those who administer the pensions and of course, there will be an exoneration clause, a built in assurance that if these administrators drive the pension fund into bankruptcy not only will they not be liable but will be able to keep those funds.
I can see all these Wall Street types salivating over the prospect of a privatized American Social Security retirement program…they might run it for a few years and then as if by magic there will be some sort of financial markets crisis, a Stock Market crash and all that money will disappear into thin air.
Senator Bill Nelson: “Just as lawmakers were preparing to leave Washington last week, a group of seven Republicans quietly filed a bill in the House.� their proposal would effectively end Social Security as we know it.
More specifically, it would have Americans opt out of traditional Social Security and put money into private accounts at risk in the stock market.�
Well, I'm betting enough people don't want to stake their retirement future on Wall Street -- especially not after the hardships they've experienced during the recession with declining IRA's.
To make sure the Republican plan doesn't succeed, we have to bring them some unwanted attention.”
Click here to sign my public petition opposing House Republicans' Social Security privatization plan now.
SOURCE: http://www.norcalblogs.com/post_scripts/2011/05/chiles-privatized-social.html
(1) http://www.nytimes.com/2005/01/27/business/worldbusiness/27pension.html
