The Chilean social security system makes it possible to plan the pension. This means making a projection of the monthly amount of pension that the worker wishes to receive when he/she retires, or deciding on the age of retirement. The best method of planning is to seek advice from the AFP and estimate what the pension is likely to be according to the individual situation. If people wish to improve the results, they should start to save voluntarily as soon as possible.

The multifunds which began to operate in August last year are a very important tool in the task of pension planning, because they allow all workers to choose between different funds with different risk/return structures. Younger workers, given their long saving horizon, can take on a higher level of risk and expect better yield in the long term. It is also worth bearing in mind that both mandatory and voluntary (APV) savings can be placed in different funds.

This additional saving cannot be left for the years immediately preceding retirement because when the person is close to retiring age the payment of voluntary contributions has a very marginal impact on the result of the pension.

This point is illustrated in the following table, which shows the impact of an additional saving of $10,000 at different stages in a person’ s life and the increase that this will produce in the pension.

If a man begins to save $10,000 per month voluntarily at age 60, only 5 years before retirement, the increase in his pension will be only about $5,000 per month. On the other hand, if he does this at 25 years of age, he can increase his pension by more than $150,000 per month.