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The impact of the Covid Pension Fund Withdrawals in Chile on the future retirement income of the Social Security affiliates and their households

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  • Alejandra Inzunza
  • Carlos Madeira

Abstract

During the COVID-19 pandemic, Chile enacted three exceptional laws to allow withdrawals from the affiliates’ pension accounts. We analyse the impact of these withdrawals on the pension savings and projected future retirement income of the individual affiliates and their households. We document heterogeneous withdrawal behaviors among income levels, with lower income households using up a higher percentage of their retirement savings. Additionally, we simulate the workers’ contributions to retirement, showing an average reduction of 21% in their contributory pensions. However, due to the increase in non-contributory pension benefits, the average loss in the total pension income is just 8%.

Suggested Citation

  • Alejandra Inzunza & Carlos Madeira, 2023. "The impact of the Covid Pension Fund Withdrawals in Chile on the future retirement income of the Social Security affiliates and their households," Working Papers Central Bank of Chile 991, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:991
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_991.pdf
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    References listed on IDEAS

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    1. Madeira, Carlos, 2019. "Measuring the covariance risk of consumer debt portfolios," Journal of Economic Dynamics and Control, Elsevier, vol. 104(C), pages 21-38.
    2. Miguel Lorca, 2021. "Effects of COVID‐19 early release of pension funds: The case of Chile," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(4), pages 903-936, December.
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