Can defined contribution pensions survive the pandemic? The Chilean case

The impact of the COVID-19 pandemic threatens the viability of Chile's defined contribution (DC) pension system, undermining its financial foundation and exposing its vulnerability to political risk. The COVID-19 crisis led to the approval of three rounds of emergency withdrawals of 10 per cent of pension savings (as of April 2021). Utilizing pension funds during an economic crisis is neither new nor uncommon - during the Great Recession, several countries in Central and Eastern Europe diverted DC pension funds to cope with the fiscal stresses. As Chile prepares to draft a new constitution, debates about the efficiency and equity of the pension system are ongoing. In this regard, and as the political response to the pandemic demonstrates, the DC system has failed to live up to its promise of ending political risk and preventing the diversion of pension funds for other expenditures.