Study: 37% of workforce not contributing to pension system

Some 2.4 million Chileans, or 37% of the workforce, are not contributing to the mandatory private pension system, AFP-ag, the association representing Chilean pension fund managers or AFPs, said in a new study. Among them, 1.6 million are independent workers and some 495,000 are unemployed, the study said. Currently, AFPs count some 7.08 million affiliates, a figure that surpasses the active workforce and shows many people joined the AFPs but later left employment or were made redundant, the AFP-ag added. Some 3.4 million affiliates do not contribute either because they are unemployed, independent workers or not part of the workforce (such as housewives or students). The system's coverage level is strongly dependant on economic activity in each of Chile's regions. The Northern II region and Southernmost XII region come first in coverage levels with 78% and 82% respectively due to their mining and oil industries, which provide stable jobs. On the contrary, some 46% of workers in the IX region do not have defined work contracts. The association said reducing unemployment and informal jobs is needed to increase the affiliation coverage, but the most important challenge is to encourage independent workers to join the system. High rates of alteration between independent and contractual employment reduces the amount of pension savings they are able to accumulate. That is also an important issue for the government, as the higher coverage from affiliation will allow it to disburse less on minimum and assistance pensions, the study added.