CBS Finally Airs Look at Chile's Success
with Private Accounts

Five weeks after the CBS Evening News with Dan Rather featured a story on how Britain's decision years ago to allow private retirement investing led to "a life in poverty" for many, the very first CBS Evening News with Bob Schieffer provided a balancing look at Chile's success with individual stock market investment of retirement funds. One difference in the two stories: The one on Britain was 100 percent negative whereas the largely glowing piece about Chile also included some critical comments. Back on February 2, Sheila MacVicar declared that Britain did "just like President Bush proposes" and "analysts say that was a disaster." MacVicar lectured: "At the moment when the U.S. administration says Social Security in the U.S. is broken, British pension experts say that same U.S. system may be part of the answer to their problem."

MacVicar's piece was so one-sided that Dan Rather followed up by noting how Bush's plan wouldn't allow investment in individual stocks and promised a look at Chile, where supporters say "the plan works quite well," in "an upcoming broadcast."

Trish Regan's March 10 story from Chile delivered a positive assessment of that nation's experience, but she also gave time to how "critics say it's a system with serious flaws. Many of Chile's poorest workers, like this tomato farmer, told us they can't afford to put away 10 percent of their pay. Nearly half of Chile's workforce is self-employed, and many are seasonal workers who rarely declare income, pay taxes or contribute to their pensions. These people have little to retire on, other than the government's guaranteed payment of $150 a month."

-- February 2 CBS Evening News, the night of President Bush's State of the Union address.

Dan Rather, in Washington, DC: "As you know, and as President Bush will say here again tonight, he wants to privatize a portion of Social Security. That is, let workers direct some of their Social Security payroll taxes into private accounts of stocks, bonds and special Wall Street combinations. One country did just that. It's Britain. So you may want to see, well, is it working there? CBS News correspondent Sheila MacVicar gives you the 'Inside Story.'"
MacVicar began her dour report: "For most of Britain's retirees, there is no pension jackpot. For many, there is a life in poverty."
Woman: "Well, I blame the government for that."
MacVicar: "Twenty years ago, the British government partially privatized their pension system. It seemed like a good idea at the time, a time when the market was strong and the promise of strong returns seemed real. But only a few reaped any benefits."
Robin Ellison, National Association of Pension Funds: "I think, with hindsight, we are beginning, possibly, to regret having done it. It was a noble experiment at the time."
MacVicar misleadingly equated Britain's plan with Bush's proposal: "Just like President Bush proposes, the British government thought it could offset a lower state pension by encouraging private investment accounts. Analysts say that was a disaster -- 75 percent of those accounts will not provide adequate pensions. Pensioners' protests have laid bare the facts [video of naked men on a beach carrying a long sign that declared: "STRIPPED of our PENSIONS"]: Companies went bust; people were charged too much for financial advice; some funds promised returns they couldn't possibly deliver; and in 2000, the stock market crashed. Tens of thousands have been left with nothing."
Alan Marnes, pensioner: "It never says your pension is at risk."
MacVicar: "The company Alan Marnes worked for since the age of 15 went bankrupt, and the pension fund was used to pay those who had already retired."
Marnes: "There will not be a penny left for those of us yet to retire."
MacVicar: "And for you?"
Marnes: "Nothing. Not a brass penny is there left for me."
MacVicar: "Another key Bush proposal, just like Britain, is to link the state pension not to rising wages but price inflation, which is only a percentage point or two different. But over 20 years, that difference is compounded. Ros Altmann is an expert on pension economics and a consultant to Britain's current prime minister."
Ros Altmann, economist: "The state pension has fallen so far behind earnings that far too many of our pensioners have ended up in poverty. We now have pretty much the lowest state pension of any developed country in the world."
MacVicar: "British pensioners today collect only $580 a month from the state. Under the old rules, that same pension would be worth nearly twice that. How to fix the problem?"
Ellison: "We might want to copy the existing American system, which is a very simple Social Security pensions arrangement for most of the population."
MacVicar concluded with an indirect shot at Bush: "At the moment when the U.S. administration says Social Security in the U.S. is broken, British pension experts say that same U.S. system may be part of the answer to their problem. Sheila MacVicar, CBS News, London."

Even Rather realized MacVicar's equating Britain's plan with Bush's ideas was a distortion: "Now, to try to avoid what happened in Britain, President Bush would limit the options of workers participating in private Social Security accounts. They'd have to choose from a small number of what are called relatively low-risk investments. In South America, Chile also has private retirement accounts for workers, and supporters there say the plan works quite well there. We will be reporting on that in an upcoming broadcast."


-- March 10 CBS Evening News. Not until after Rather's departure did CBS get around to the Chile story. Bob Schieffer set it up: "As you know, President Bush's plan for overhauling Social Security would allow workers to invest some of their payroll taxes in the stock market. The South American nation of Chile already has a similar plan. Our CBS News correspondent Trish Regan went down there to find out how it's working. She has the 'Inside Story.'"
Regan began from Chile as matched against the closed-captioning by the MRC's Brad Wilmouth: "Here in the heart of the Andes Mountains is an example of a fully privatized social security system. Forty-eight-year-old Hector Espinoza is one of the 3.6 million Chileans with a private retirement account. What is the biggest benefit of it?"
Hector Espinoza, Chile resident: "I have the chance to control my retirement."
Regan: "In 1980, Chile's traditional pay-as-you-go social security system was about to go under. In response, the government created a program that required workers to save for their own retirement through private investment accounts. Ten percent of every paycheck must now be deposited into an individual account, an AFP, as it's known in Spanish. Workers have to pay an additional percentage [2.3%] of their wages to cover administrative costs, health and disability insurance. The money in the account grows tax-free until the worker retires. With annual returns topping 10 percent since the program began, advocates of privatization deem Chile a success story. Nearly $60 billion worth of retirement assets have been put to work right here in the Chilean stock market. Supporters of the private accounts say all this investment in local companies has helped fuel an unprecedented economic boom. Chile's former Labor Secretary, Jose Pinera, designed the program."
Jose Pinera, former Chilean Labor Secretary: "I believe it gives people ownership, freedom, choice. I believe it is such an American system."
Regan: "But critics say it's a system with serious flaws. Many of Chile's poorest workers, like this tomato farmer, told us they can't afford to put away 10 percent of their pay. Nearly half of Chile's workforce is self-employed, and many are seasonal workers who rarely declare income, pay taxes or contribute to their pensions. These people have little to retire on, other than the government's guaranteed payment of $150 a month. Still, most of the people who consistently contribute to their accounts, like Hector Espinoza, say the system works."
Espinoza: "I hope to put more money in the system in order to obtain a better pension."
Regan concluded on an upbeat note: "But that pension depends on the Chilean markets sustaining their impressive returns. Still, Hector says, the risk is worth it because for him and millions of Chileans like him, ownership of a retirement account means ownership of their future. Trish Regan, CBS News, Santiago, Chile."