Debate on 2 | January 2012
There is a significant change that you are building up a pension with a pension fund, via your employer. Obligatory. You have no choice. Do you feel that your pension fund realized poor return on your pension investment? Do you feel that you are not receiving any service or that the costs are too high? Unfortunately, the obligatory nature of this system, prevents you from leaving. That is, unless you find another job in different industry. Only to find out that, once again, your new employer requires you to place your pension funds under the management of another pension fund. It is about time to leave this paternalistic system, which fit perfectly with the labor relations from the fifties and sixties, behind us.
Is there an alternative? Chile has an innovative pension system, in which you do have control over your pension funds. Below you’ll find three reasons why Chile has the pension system that many Dutchmen want to have.
1) You choose who manages your money
In Chile, you can choose between six different pension funds. The employer makes sure that every month, 10% of your salary is deposited onto your account with the fund of your choice. Every four months, you’ll receive an overview from your own fund. It shows you how your fund performed. Moreover, you can compare your fund with the other five funds, one to one. It allows you to see what fund performed best in terms of return, costs and quality. If you are not happy with your fund, you can switch to another fund at any given time. Free of charge.
2) You know what you’ve got (and what you haven’t got)
The Dutch pension system is the product of endless negotiations between social partners. For years, employers and unions decided what is good for you. This has led to a complex system of traditional measures and ambiguous guarantees. You have to be nothing short of a pension expert to understand what you’re entitled to. And if the pension agreement lives to see the day, everything will be even more complex. That’s great for the employment figure in the pension industry, but not for your pension, which will only become more expensive and incomprehensible. That’s not how it works in Chile. There, pension is an extremely simple thing: an individual savings account with a fund you choose yourself. Life and disability insurances are simple and transparent as well. The payment and contribution for these insurances are identical for each of the six pension funds. We can’t make it more fun, but we can make it simpler.
3) You’ll feel involved in your own pension, once again
The pension awareness in the Netherlands is shockingly low. Studies show that, despite a lot of media coverage concerning pensions, just 13% of those asked knows where they are in terms of their pension. The only way to increase pension awareness is to give people control in a system that anyone can understand.
With all these advantages, it is no surprise that many other counties have been inspired by the Chilean pension system, such as Peru, Argentina and Poland. Let’s go Chilean!