Policy change in turbulent times: The nationalization of pension funds in Argentina

ARZA, CAMILA

The global crisis and transformative social change

Palgrave Macmillan

Año: 2012; p. 123 - 140

The pension reform, implemented in 1994, was a paradigmatic shift towards market solutions in pension policy. The existing public PAYG pension system was replaced with a mixed and parallel system where workers could choose between public or private administration. Private pension funds were set up and the contributions of workers in the private system started to be accumulated in individual accounts and invested in a variety of instruments such as state bonds, bank deposits and equities. In the private branch of the system, benefits no longer depended on final salary but were instead linked to the value of individual assets accumulated upon retirement. The performance of the private pension system was not without problems. Low coverage rates, volatile investment returns and high administrative costs raised doubts on the structural capacity of private pensions to provide affordable benefits, universal coverage and secure retirement. In 2008, the financial crisis hit pension funds in Argentina as elsewhere in the world. Short after the crisis unfolded, the government announced the nationalization of pension funds, reversing the privatizing trend that had spread over the 1990s. The reform re-established the public PAYG system and the National Social Security Administration (ANSES) started to manage the resources that pension funds had accumulated since 1994, which were collectively transferred to the state. The reform also increased benefit commitments with future generations of pensioners who became entitled to a pension fully paid by the state, rather than by a private company as before. This paper investigates this policy shift, looking both at the institutional changes and their likely effects on pension system performance and outcomes. The structure is as follows. After this introduction, the second part briefly studies the operation of the mixed public-private system that has now been abandoned. A third part turns into the recent reform process looking at the rebalancing of the public-private mix that has taken place a few years before nationalization. The fourth part analyses pension fund nationalization itself and the impacts it had on social security accounts. The fifth part deals with the remaining challenges of pension policy. It focuses on issues of coverage, gender equality, benefit adequacy and financial sustainability, as the main areas of concern for the future.