On October 28, President Sebastián Piñera announced a plan to reform the country’s pension system in an effort to boost payouts. According to reports, the reform proposal would increase the monthly contribution from the formal sector to the country’s six private pension fund managers from 10% to 14%. The increase would be gradual and fully financed by employers. The government would also boost its contribution to a collective fund from 0,8% to 1,12% of GDP while introducing additional funds for the middle class, women and those who delay retirement. Furthermore, in a nod to the opposition, Piñera’s proposal reportedly incorporated some elements of a plan presented by his predecessor, former President Michelle Bachelet, including measures to increase competition among fund managers. The government will send the reforms to Congress in two weeks, where they must be approved before they can be implemented.
The Chile Pension system is a fully funded capitalization system run by private sector pension funds, known as AFPs, which hold nearly 200 billion USD in assets. The pensions have nevertheless fallen short of expectations due to low payouts. While Piñera explains that an aging population, insufficient pension contribution rates, poor-paying jobs, and high unemployment rates have caused the reduced payouts, critics of the system have placed the blame on the mismanagement and corruption of the AFPs. Various legislators from leftist parties in the opposition have indicated that the current plan is not really a reform but a deepening of the current capitalization system and that it is therefore insufficient. Moreover, Chile has witnessed in recent years violent protests against private pension funds. The most notorious civil society group is the No+ AFP movement, which calls for the return to a public pension system. Accordingly, this group has already declared itself against the current proposal. Furthermore, the group has declared that the only way to advance real change is by means of social protests, which are therefore likely to continue taking place.