PARC Working Paper Series

Document Type

Working Paper

Date of this Version



Skog, Jeremy. 2006. "Who Knows What About Their Pensions? Financial Literacy in the Chilean Individual Account System." PARC Working Paper Series, WPS 06-11.


This paper examines the question of what affiliates of the Chilean pension system know about their pension system, and whether they respond to incentives to learn more about their benefits depending on whether they stand to gain most from a particular aspect of the pension system. We rely on the 2004 Social Protection Survey (Encuesta de Prevision Social, EPS) to assess individuals’ financial literacy regarding several structural questions about their pension system. These questions are aggregated into several clusters, representing aspects of the pension life cycle, and literacy along these vectors of knowledge is assessed using an integer scoring system. Using multivariate regression, we show the older, healthier, more educated, married male workers know more about the system. Also, union members, those with higher incomes, and workers at larger companies are also more financially informed. We also find that knowledge varies by subject area; accordingly, it is important to ascertain what literacy shortfalls must be targeted before determining what education efforts might be useful. We also conclude that people become more pension literate, as that knowledge becomes more useful.


Chilean pension system, Incentives, Benefits, Social Protection Survey, Financial literacy, Pension life cycle, Multivariate regression



Date Posted: 10 March 2008