Developing Annuities Markets: The Experience of Chile

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Developing Annuities Markets The Experience of
Chile

• Comments Solange Berstein
• Superintendent of Pension Fund Administrators -
  CHILE

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Importance of the payout phase

• The payout phase has complexities that must be
  tackled by any pension reform
• Different alternatives for payment
• Timing of retirement annuity risk
• Managing longevity risk
• Availability of investment alternatives
• Competition in provision of retirement products,
  given its complexity
• This book is an important contribution to the
  analysis and policy design
• Chile has already a significant period of
  experience New reform introduced an electronic
  quotation system

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What does SCOMP do?
System
Participants
Suppliers
3. System sends quotes to suppliers
Affiliate
1. Makes quotes through an AFP, Insurance Company
or broker
2. Participant sends quote to the system.
AFP
AFP
4. Suppliers send pension offers to the system
Life Insurance Companies
Life Insurance Companies
5. Informs the Affiliate
Affiliate
Insurance brokers
6. After receiving offers affiliate may choose
between the following options

• Make a new quote
• Select an offer and obtain a pension
• Request an external offer
• Desist from pensioning
• Request a bidding process

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Main Results more than 88,000 pension requests
September, 2006
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And 65 of selected modalities are annuities
51.950 Have selected modalilty
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We want that people take well informed decisions
However, on average, the difference between the
best offer and the one chose is less than 2
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Percentage of Annuities signed up with and
without commission
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Average Commission by intermediary
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Percentage difference between the highest and
lowest offers in Scomp for an individual By type
of pension (September, 2006)
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What goes next?

• Better information to affiliates
• Advisory for affiliates preventing conflicts of
  interest
• Promote the auction alternative
• Development of variable annuities
• Improvement of life expectancy tables