Chile: Lower House Debates Second Bill on Pension Fund

Chile's Lower House Tuesday began the discussion on the pension fund bill that would allow affiliates to the Pension Fund Administrators (AFP) the second withdrawal of 10 percent of their pension savings.

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The initiative promoted by lawmaker Pamela Jiles from the Humanist Party (PH) seeks to allow a new withdrawal of funds with maximum quotas equivalent to US$4.3 million and minimum amounts of US$1 million.

Unlike the Retirement Act passed in June this year, this new Bill requires the money transfer to be done in a single installment and the collection of an income tax to all those who have a monthly income over US$2,5 million.

The initiative implies a constitutional reform so it will need 93 votes in favor at the Lower House, which is composed of 155 seats. If passed, the Senate will then discuss the Bill that can become law if it gets three-fifths of votes in favor.

In June, the Senate approved the withdrawal of 10% of the amounts deposited in AFP in order to address the COVID-19-triggered economic crisis. The legislation promoted by opposition groups to the government of President Sebastian Piñera was approved by 29 votes in favor, 13 against, and 1 abstention.

The AFP are private companies responsible for managing the mandatory individual savings on which the Chilean model is based. The law orders each worker to contribute 10 percent of his gross salary to a personal pension fund available upon retirement.

The current Chilean social security model was established in 1980 during the Augusto Pinochet dictatorship (1973-1990) and has been highly condemned by the population over the past years.