A worker chooses one of about 14 private Pension Fund Administration companies to manage his account. Each company operates the equivalent of a mutual fund that invests in stocks and bonds. Investment decisions are made by the managing company. Government regulation sets only maximum percentage limits both for specific types of investments and for the overall mix of the portfolio. In the spirit of the reform, those regulations are to be reduced with the passage of time and as the companies gain experience.
Workers are free to change from one investment company to another.
For that reason, there is competition among the companies to provide a higher return on investment, better customer service or a lower commission. The government retains some involvement in the system, via a safety net financed from general revenues for those who have not accumulated enough. Only after his working life has ended, and his account has been depleted, does a poor pensioner receive a government subsidy. Upon retiring, a worker may choose one of two general payout options. Under one option, a retiree may use the capital in his account to purchase an annuity from any private life insurance company.