Supervising mandatory funded pension systems: issues and challenges

The regulation and supervision of pension funds is a critical part of building public confidence in a funded-pension system. This paper argues that confidence is best bolstered by an independent, autonomous and transparent supervision agency, particularly when previous systems had failed. The choice between proactive and reactive supervision depends on previous experience of selfregulation in a country’s financial sector. The paper examines four key areas of supervision in detail: institutional, financial, membership and benefits control. It looks at collection of contributions, asset valuation, portfolio limits, custodianship and benefit guarantees. New data are presented on the performance of supervision agencies in and on marketing and operation costs of new pension funds in Latin America. Comparative data for OECD countries are also included.