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This Congressional Budget Office (CBO) paper describes the design of the pension systems in Chile, the United Kingdom, Australia, Mexico, and Argentina. Those countries have implemented policies that either replace the public pension system with mandatory personal retirement accounts or encourage their workers to opt out of the existing public pension system. The paper also compares the different approaches of those systems and discusses six aspects of the privatization efforts that may have relevance for the Social Security debate in the United States.

Jan Walliser and Scott M. Becker of CBO's Macroeconomic Analysis Division wrote the paper under the supervision of Robert Dennis and Douglas Hamilton. Matthew Berger, Ben Page, Ralph Smith, David Torregrosa, and Christopher Williams made valuable suggestions. Ezra Finkin provided research assistance. Outside CBO, Anita Schwarz of the World Bank; Edward Gramlich, member of the Board of Governors of the Federal Reserve System; and Luis Cubeddu of the International Monetary Fund provided important comments and helpful advice. Liz Williams edited the manuscript. Verlinda Lewis Harris and Dorothy Kornegay prepared the document for publication. Laurie Brown prepared the electronic versions for CBO's World Wide Web site.

Questions about the paper may be directed to the Macroeconomic Analysis Division.
 

June E. O'Neill
Director
January 1999
 
 

I - INTRODUCTION AND SUMMARY

• Characteristics of Selected Countries
• Pension Reforms
• Relevance of the Reforms for the United States

II - THE PRIVATIZATION OF PENSIONS IN CHILE

• The Chilean Pension System Until 1980
• The Privatized Pension System
• Financing the Transition and National Saving
• Regulation of Pension Funds and Costs
• System Performance

III - THE PENSION SYSTEM IN THE UNITED KINGDOM

• Overview of the Pension System in United Kingdom
• Contracting Out with Occupational Pension Plans
• Contracting Out with Personal Pension Plans
• The Effect of Pension Reforms on Government Finances and National Saving
• Regulation of Pension Plans and Costs
• System Performance

IV - PENSION FUNDS AND PUBLIC PENSIONS IN AUSTRALIA

• The Public Pension System
• The Expansion of Superannuation
• Tax Treatment
• The Superannuation Guarantee, Government Finances, and National Saving
• Superannuation Funds: Structure, Oversight Investments, and Costs
• System Performance

V - THE PRIVATIZATION OF PENSIONS IN MEXICO

• The Pension System Before 1992
• The 1992 Reform
• The 1997 Reform
• The Fiscal Costs of the Reform
• Regulation of Pension Funds and Costs
• System Performance

VI - THE PENSION SYSTEM IN ARGENTINA

• The History of Argentina's Public Pension System
• The 1993 Reform
• The Fiscal Costs of the Reform
• Regulation of Pension Funds and Costs
• System Performance

VII - LESSONS FROM OTHER COUNTRIES

• Historical Environment
• Transition Costs
• National Saving
• Minimum Benefit Guarantees
• Regulation of Pension Funds
• Costs of Pension Accounts and Annuities

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