Chilean Senate Begins Processing the Pension Reform


March 7, 2024 Hour: 10:55 am

On Wednesday, the Senate’s Labor Committee began to study the bill for pension reform presented by Chilean President Gabriel Boric.

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“The dialogue has just begun. The president has instructed us to be open to seeking formulas that allow us to increase the amount of pensions, which is the objective of this reform,” Labor Minister Jeannete Jara said.

Presented in November 2022, the bill proposes the creation of a mixed pension system and the possibility for the State to manage private pension funds.

The Boric administration also seeks to raise the pension contribution from 10 to 16 percent. To garner political support, it proposes that this additional six percent be evenly distributed between social security and the private individual capitalization mechanism.

However, right-wing legislators rejected this proposal and demanded that the entire increase be directed to the each worker’s individual capitalization accounts. They also oppose the formation of a mixed pension system as they do not agree with the State managing the funds.

Created by the Augusto Pinochet dictatorship (1973-1990), the current Chilean pension system is based on individual capitalization and obligates each worker to contribute 10 percent of their monthly salary to a personal account, which is controlled by private companies known as Pension Fund Administrators (AFP).

In recent years, the AFP security model has been strongly criticized by the population since the average monthly pension is about US$321 for men and US$126 for women.

Previously, other governments made some changes to the AFP model. In 2008, for instance, it was establishment a State-financed pension, which is focused on the poorest 60 percent of the population, who had never contributed to social security or received very low pensions.

In 2022, however, the State pension project was replaced by the Universal Guaranteed Pensions (PGU), which provides a maximum pension of about US$218.

Autor: teleSUR/ JF

Fuente: EFE

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