GLOBAL - FIAP, the International Federation of Pension Funds Administrators, has hailed the individual capitalization system of pensions that was pioneered by Chile as making a “decisive contribution” to the pensions problem.

The federation recently held its annual general meeting in Kiev at which it declared that, “the individual capitalization systems are making a decisive contribution towards solving the pensions problem”.

It added that, in conjunction with other economic policies, they “represent an instrument that contributes to the economic development of nations”.

The meeting was held in the Ukrainian capital in recognition of the number of eastern European countries with pension systems based on individual saving and capitalization. It said the system has been introduced in Bulgaria, Croatia, Slovakia, Estonia, Hungary, Kazakhstan, Kosovo, Latvia, Macedonia, Poland and Russia.

The meeting, attended by European Federation for Retirement Provision vice chairman Angel Martínez-Aldama, also recognized “the importance of extending the coverage of contribution-based pension systems and particularly that of the new individual capitalization systems”.

“For this reason it invites governments to introduce policies to encourage formal employment and work and to create incentives for voluntary saving in the case of those workers who are not subject to mandatory social security rules.”

It countered criticism of some of the reforms, saying, “the problems are due in fact to faults in the design of the regulatory framework within which the administration companies have to carry out their duties”.

It called on governments to make sure that they provide the individual capitalization systems with an “appropriate, stable” regulatory framework.

And it reaffirmed its decision to promote the diversification of investment portfolios through more investment in equities and international assets - eliminating all obligatory investments. It said this would fulfill the main aim of the pension systems, which is to provide the best possible pensions.

Santiago, Chile-based FIAP is headed by Guillermo Arthur Errázuriz and is an umbrella organisation for “countries that have pension funds administrators systems and those in process of implementing them”.