Designing a viable pension system for Chile: A socio-economic proposal

Chile’s privately managed individual pension fund system, with its low replacement rates and pension incomes far below the minimum wage, has long been the subject of serious criticism. A new model is required that considers not only financial, economic and demographic variables but realistic assumptions about the behaviour of actors in a design that guarantees minimally acceptable incomes. With that in mind, the literature pertaining to the Chilean pension system found on the Web of Science (WoS) platform’s Master Journal List is surveyed to identify the system’s bases, assumptions and critiques. An approach is then proposed based on the mathematical theory of viability as an extension of system dynamics techniques. We argue that the combination of these techniques and viability theory are not only useful for solving the problem of the pension system’s viability but in fact the only method of solving it. Based on concepts of chance and necessity of viable systems, the approach is a multi-system one that provides a wider range of solutions over multiple dimensions compared to the current system, in particular replacing the latter’s narrow view of workers as homo oeconomicus with a much broader concept we denote homo ecologicus. Although there is currently no algorithmic method for solving the model’s set of variables, we believe the proposed model has great potential as a basis for the design of a truly viable pension system.