6 1982 to 8..27% in 1983 and 8.69% in 1984, fell gradually to around 3.1% of salary by 1990, and have been stagnant since.

**Performance of the Funds.** Table 3 shows the average income of all contributing salaried and self-employed affiliates, their average gross commissions, net commissions after deducting expenses of death and disability insurance, real returns (only real returns are relevant and available given pervasive indexation of financial and other contracts in Chile) on investments, and the internal rate of return on pension fund for an affiliate that participated in the system from 1982 onwards, based on both the amounts credited to his/her individual account as well as the commissions paid to the AFPs, but ignoring death and disability premia.

Table 3: Chilean Pension Fund Returns Net of Commissions

|Monthly<br>Income<br>Ch$'|Annual<br>Contribution<br>@ 10% of<br>income'|Gross<br>Commission<br>% of avg.<br>income|Net<br>Commission<br>% of avg.<br>income|<br>Commission<br>Ch$'|Contribution<br> <br>and Net<br>Commission'|Pension<br>Fund Real<br>Returns<br>without Fees<sup>2</sup>|Year End<br>Assets<br>Managed'|Annual<br>IRR<br>to date<sup>3</sup>|
|---|---|---|---|---|---|---|---|---|
|1982 117221|140665|_5.10%_|3.31%|46560|187225|28.8%|18117|-3.2%|
|1983 98995|118794|8.27%|_5.50%_|65337|184131|21.3%|363865|-1.3%|
|1984 93974X|<br>112769|8.69%|6.38%|71946|184715|3.5%|493316|-5.9%|
|1985 122197|146636|6.68%|4.43%|64960|211596|13.4%|725705|-2.3%|
|1986 122910|147492|6.05%|3.89%|57374|204866|12.3%|980601|0.3%|
|1987 117679|141215|5.49%|3.42%|48295|189510|_5.4%_|1182394|0.5%|
|1988 113357|136028|4.00%|2.09%|28430|164458|6.4%|1402801|1.4%|
|1989 137616|165139|3.55%|1.85%|30551|195690|6.9%|1676128|2.1%|
|1990 141237|169484|3.15%|1.93%|32710|202195|_15.5%_|2131682|4.2%|
|1991 151718|182062|3.10%|2.06%|37505|219566|29.7%|3000926|7.9%|
|1992 163315|195978|3.07%|2.13%|41743|237721|3.1%|3296008|6.9%|
|.1993 175279|210335|3.07%|2.28%|47956|258291|16.2%|4074370|8.0%|
|1994 199972|239966|3.05%|2.28%|54712|294679|18.2%|5099546|9.1%|
|1995 204575|245490|3.06%|2.36%|57936|303426|-2.5%|5211410|7.4%|

Simple average = 12.7% Notes: ' Amounts are in December 1995 Chilean Pesos.

2Real returns on investible assets for each year without adjustment for fees and commissions. 3Internal Rate of Return reflects the IRR up to the corresponding year.

Source: Superintendent of Pension Fund Administrators, June 1996; D. Vittas, A. Iglesias, WPS 867, February 1992.

Table 3 shows that the _Chilean AFPs_ earned an average annual return of 12.7% during 1982-95, and the average return in the first five years was a spectacular 15.9%. But factoring in the commissions charged by the AFPs into this calculation, the internal rate of returnfor _the affiliates_ was negative for the first four years and barely 0.3% p.a. after five years. Thus an affiliate who joined the system in 1982 virtually failed to earn any returns on her investments for five years, despite rather spectacular gains on her investment portfolio! The results are rather similar when comparisons are made for different years as can be seen from Table 4. Over 1982-95, the net real return for the average affiliate was still high at 7.4% p.a., but substantially lower than the 12.7% p.a.