Boric's pension reform proposal

CHILE - In Brief 03 Nov 2022 by Robert Funk

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In a nationally televised speech President Gabriel Boric announced his much-awaited plan for reforming Chile's pension system. The proposal consists of three elements: a 6% increase in contributions, financed by employers; a rise in the so-called Universal Guaranteed Pension to CLP250.000 (about USD260); and the creation of a national pension fund administrator, which would compete with private pension funds. The existing and much maligned AFP’s (the Spanish acronym for Pension Fund Administrator), would, according to the president, cease to exist. They would be replaced by new, private pension funds, to be called Private Pension Investors, which would be limited to investing the funds collected by the state’s Autonomous Pension Administrators. Existing savings will remain in private accounts. Boric’s proposal is moderate, and not too different from what has been proposed by previous governments, including that of Michelle Bachelet and Sebastián Piñera. Boric went out of his way to calm some of the more extreme fears and possible rumours. “To clear up any spooks or fake news,” he said, “pensions savings in individual accounts, both existing and future ones, will continue to count as individual property, can be inherited and will never be expropriated”. There are at least two areas where the political battle lines will be drawn in Congress. The first is the 6% increase in contributions. The proposal is that this will introduced gradually and will be covered by employers. How will this be divided up, to cover the state pension or to individual accounts? (The government seems to favor a 50-50 approach, but this is unclear). The second is the proposed Public and Private Au...