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BILL BEFORE CONGRESS
SANTIAGO - In a move likely to boost the presence of local mutual fund and insurance companies in the pension business, the Chilean government's omnibus capital-market-reform bill asks Congress to consider creating 401(k)-type pension plans administered by third-party pension managers.
Chile was the first Latin American country to institute a mandatory private defined contribution program in which employee contributions are pooled and invested by pension managers, known as Administradoras de Fondos de Pensiones, or AFPs. Individuals, not employers, choose the manager, or AFP, that will manage their mandatory pension savings.
Since early 2002, Chile has also had a voluntary system for individuals, similar to individual retirement accounts in the United States, that allows AFP pension managers, mutual funds and insurers to offer tax-deferred investment vehicles.
Should Congress incorporate this new, corporate measure, voluntary pension vehicles that include tax incentives for long-term savings could be offered directly to companies on behalf of their workers.
Intense debate
The measure has been hotly debated among Chile's money managers, with each sector touting its view via local media advertisements, press...