OPPapers.com Essay Index >> Social Issues >> Us &Amp; Chile'S Spcial Security System
We have many free term papers and essays on Us &Amp; Chile'S Spcial Security System. We also have a wide variety of research papers and book reports available to you for free. You can browse our collection of term papers or use our search engine.
Submitted by ankpatel23 on December 2, 2007
Category: Social Issues
Words: 2164 | Pages: 9
Views: 143
Popularity Rank: 81,698
Average Member Grade: N/A (Add a Comment / Grade this Paper)
Amid concerns of a collapsing United States Social Security System, the search for a new, better system has heightened to a frantic pace. In the hunt for this new system, the United States would be wise to consider the privatized system of Chile as a guide to its own pension fund system reformation. Here, we analyze the two systems, their similarities and differences, and the take-aways that the United States should glean from Chile's version of pension fund issuance.
Basics of the Chilean Social Security System
Chile's new privatized social security system replaced the old, bankrupt state-run system in May 1981 under General Pinochet. The new system had several unique features about it that still spark hot debate over its efficacy. Under the new structure, workers were required to contribute 10% of their monthly salary towards a private pension management firm account. An additional 3% of salaries went to commission fees for the pension managers and towards disability and survivors insurance. Retirement benefits were then essentially linked to the amount an individual contributed and the rate of return of the private pension management firm. Furthermore, the government also guaranteed to fill in for the discrepancy between the minimum pension amounts (Leiva 1-3).
The new system, therefore, had fundamentally three aspects to it: the government's role, the private pension fund managers' role, and the savings of individual workers. This three tiered system allowed for different groups to share in the responsibility of Social Security, lifting the burden off of the government. The government's role includes financing a part of the minimum pensions and all the pensions for the elderly poor. The Private Sector manages the mandatory Social Security savings of workers. Finally, Chile's workforce saves and invests their earnings (Chile's Pension Reform 2). The individual accounts that were created under this system incentivize...
You must Login to view the entire paper.
If you are not a member yet, Sign Up for free!