Countries 2024

In Brazil, the first pillar consists of two schemes. The General Regime of Social Security (RGPS) is a mandatory scheme covering the private-sector workforce. The Regime of Social Security for Public Servants (RPPS) includes multiple pension schemes covering public sector employees. In general, these pension plans are financed on a pay-as-you-go basis with the employee paying a percentage of their salary.

The first pillar is complemented by a voluntary, private savings scheme called the Complementary Pension Regime (RPC). Employer sponsored pensions have a long history in Brazil and the country has the oldest system in Latin America. Two pension vehicles exist that can be used to finance private pension benefits. Closed private pension entities are non-profit organisations that can be established on a single-employer or multi-employer basis and by labor unions. Authorised financial institutions also provide pensions through open private pension entities. The closed approach is typically chosen by large employers whereas the open approach is mostly chosen by small and medium-sized employers and offered to their employees. Closed funds, sponsored mainly by large private companies, traditionally provided defined benefit pensions. Like many other countries, Some of these DB plans are now closed and DC plans are on the rise.

Canada’s pension system is characterized by a mixture of public and private pension schemes. Approximately half of all Canadians rely on the public pension system which consists of two tiers: 1. Old age security – set amounts paid to all Canadians of retirement age, based solely on residency 2. Canada Pension Plan (CPP) – a mandatory earnings related pension covering all workers. The third tier of Canada’s pension system is made up of voluntary pension savings. Defined benefit plans remain the most common type of scheme in Canada, particularly for public sector employees. Like many other countries, defined contribution plans are now the plan of choice for private sector employers. We reviewed the public disclosures of the CPP and four organisations that manage mainly DB plan assets for provincial public sector employers.

In 1981, Chile introduced a mandatory defined contribution pension system. Employees are required to contribute 10 per cent of their salary and choose a private Pension Fund Administrator (AFP). AFPs are chartered as pension providers by the Chilean government and compete for individual accounts. This pension system has become known as the ‘Chilean Model’ and versions of it have been implemented in other Latin American countries. The public disclosures of the largest Chilean private sector Pension Fund Administrators (AFPs) were reviewed. 

AFP investment programs are dictated by regulation. AFPs are allowed to offer up to five investment funds, called Funds A to E, which have different proportions of their portfolios invested in equities. All AFPs must offer funds B to E, while fund A, the highest equity/highest risk fund is optional. All funds operate within regulated investment limits that cover investments in various asset classes and investment vehicles. AFPs must meet a minimum level of return for each fund that is tied to the average return for all funds of that type. There is a guarantee obligation that requires AFPs to top-up their underperforming funds. Not surprisingly, most AFPs invest in a similar way to ensure they are not required to inject capital into their funds.

AFPs set the administration fees they charge members, but the fee must be the same percentage of salary for all their members. These fees are known as commission and are applied to contributions into the funds. Commissions are intended to cover all AFP costs and generate a profit margin.

The public disclosures of the largest Danish pension providers were reviewed. The country’s primary public pension system consists of a basic pension and a pension supplement paid to the most financially disadvantaged. This primary pension is supplemented by ATP Lifelong Pension, to which most people contribute. Certain employees also participate in mandatory occupational pension schemes determined by collective bargaining. In combination, these programs cover about 90 per cent of the employed workforce.

Almost all plans in Denmark are of the defined contribution type, in part driven by the prevalence of industry-wide collective labour market agreements. The collective bargaining agreements often mandate both employee and employer participation in supplementary schemes, so while technically voluntary, participation is effectively compulsory. The occupational pension pillar is chiefly funded by employees paying into these schemes. The occupational schemes themselves are offered by a variety of providers who compete for the same customers.

The public disclosures of the five largest private pension fund managers, known as Afores, were reviewed. Mexico reformed its pension system in 1997 and instituted a fully funded, private and mandatory defined contribution system. The reform was modeled after the pension reforms in Chile in the early 1980s. Afores are responsible for managing individual accounts and investing contributions. They are chartered by the Mexican government and compete for individual accounts.

Afore investment programs are dictated by regulation. As of 2019, the Afores must offer 10 ‘Siefore’ generational funds. The Siefores are structured like target date funds: the contributions of each member are assigned to the Siefore associated with their date of birth and remain there throughout their working life. Regulations stipulate investment limits that cover investments in various asset classes and investment vehicles. Contributions are currently set at 6.5 percent of wages.

Afores set the administration fees they charge members, but the fee must be the same percentage of salary for all their members. These fees are known as commission and they are applied to contributions into the funds. Commissions are intended to cover all Afore costs and generate a profit margin.

The South African pension system consists of a means-tested, non-contributory government social security system supplemented by voluntary occupational retirement schemes.

The five South African funds that were reviewed are not a homogenous group. They included two defined benefit plans: GEPF, one of the world’s largest funds and the national electricity utility, Eskom. The other funds are ‘umbrella’ funds, defined contribution providers that compete for employer and individual members. Umbrella funds offer business owners and their employees the opportunity to join a larger established retirement fund while retaining some flexibility in plan design and features.

Sweden’s pension system consists of an earnings based “income pension” funded on a pay-as-you-go basis by employee and employer contributions of 16 per cent of earnings. An additional 2.5 per cent of earnings is paid into a funded government sponsored defined contribution “premium pension”. Reserves backing the income pension are divided evenly between four state run buffer funds, AP1, AP2, AP3, and AP4. In addition, employees covered under a collective agreement (most Swedish employees) also receive a separate occupational pension. There are four different pension collective agreements: SAF-LO, for privately employed white collar workers; ITP, for privately employed blue collar workers; KAP-KL/AKAP-KL, for employees within local government; and PA 16, for Swedish civil servants.

The Swiss pension system is founded on three pillars. The first is a state-run pension scheme for seniors, orphans, and surviving spouses. The second pillar consists of pension funds run by investment foundations, which are tied to employers. The third pillar is composed of voluntary private investments. The plans that were a part of this review primarily fall under the second pillar.

The review included three public institutions, including the fund responsible for investing assets backing social security and two of the largest private pension funds. The public institutions managed assets primarily for public workers or pensioners tied to the Confederation, specific cantons, or communes within Switzerland.