In 1981, when Chile was under the military dictatorship of Augusto Pinochet, Minister of Labor and Social Security José Piñera created the country’s defined contribution scheme. The system required employees to set aside 10 percent of their income for retirement and, in doing so, provided a huge boost for savings, investment, employment and growth. In fact, the World Bank has held out Chile’s defined contribution system as the platinum standard. It was so well respected, 30 other countries in Latin America and around the world have copied the Chilean retirement model. Investments have driven Chile’s nascent capital markets to the extent pension funds, known as AFPs, now exceed $176 billion, or about 70 percent of GDP.

Unfortunately, there have been some struggles recently as savings rates have plummeted with the informal economy, which has led to some participants skipping payments. Added to that is the lack of competition among private retirement program providers, w