[ARCHIVO] President Bachelet announces improvements to the pension system on national television

“My fellow Chileans,

We all need retirement in order to have a decent, high-quality life once we stop working. Everyone has a right to this, and it should be a shared responsibility.

The current pension system has caused many, too many, to receive very low pensions and to be left without sufficient support.

We must come together as a nation to rectify this situation.

Protecting people, especially the most vulnerable among us, has been the purpose of my career in public service and the focus of my work as President.

As such, in 2008, during my first administration, we created the solidarity pillar in a system that had previously provided only for individual capitalization and limited and precarious social pensions.

Through the solidarity pension contribution and the basic solidarity pension, we took a first step towards ensuring that individuals who did not have minimal pensions for their later years or in case of disability would not be impoverished.

And this has had tangible results.

Today, over 1.3 million people receive monthly solidarity disability and retirement pensions that allow them to live a better life.

But it is not enough to address the most extreme situations. Even people who have worked and made contributions for many years sometimes receive or will receive insufficient pensions.

And many of the inequities in our society, such as those related to income or gender, are maintained when it comes time to retire.

As the country knows, as soon as I began my second term, I appointed a committee of experts with differing viewpoints to identify solutions to this problem. We have listened to their proposals as well as to society’s demands. Now the time to act has come.

Improving pensions permanently and increasing their efficiency and their solidarity is a very complex undertaking because we cannot jeopardize workers’ futures or the future of our economy.

There is no room for easy solutions and baseless promises here. In the end, that would harm us all.

Following up on the promise that I made during my last state address on May 21, today I would like to announce a set of changes that we will undertake. They will have both short- and long- term effects.

First, we will strengthen the cooperative nature of the pension system. Our system must be truly mixed and tripartite, incorporating the shared efforts of workers, employers and the State.

To this end, at the sole cost of the employer, we will gradually increase the contribution rate by five points over a period of no more than 10 years. The government will do its part as the country’s main employer.

This increase in contributions will allow us to create a collective solidarity savings pillar. One part of it will allow current pensions to be increased, and another will be designed to achieve more equity in the future pensions of workers who are currently paying into the system.

In doing so, we are ensuring more solidarity on the part of the current generation with those who have already finished working, and with the future pensions of their own generation.

Second, we will maintain and strengthen the current disability and retirement solidarity pillar, which will ensure that those who have not worked or have not contributed enough will receive the minimum pension.

Third, the current contribution of 10% will continue to be deposited into the individual accounts owned by each worker, and we will continue to encourage voluntary savings by both individuals and groups.

But the system that manages these individual accounts must undergo significant regulatory changes in order to ensure its equity, transparency and efficiency.

Losses in workers’ funds cannot be a source of business for anyone.

For example, administrators should refund the commissions charged during periods in which affiliates’ funds present negative performance.

The funds that are owned by millions of workers must be managed transparently and with the participation of their true owners.

With this goal in mind, our proposal will incorporate representatives elected by the people who pay pension contributions into the management of the funds so that they can participate in key decisions regarding investment policies, the election of board members and the companies in which resources are invested or communications campaigns.

We also will amend the different forms of hidden commissions or intermediary commissions which take resources away from affiliates’ accounts without any real justification.

And we will promote more measures to ensure competition within the system, such as bidding for affiliate portfolios in order to lower commissions and improve the services provided to pension contributors.

Along this same line, we will continue with the creation of a state-owned mutual fund administrator, which will introduce more competition, provide an option for those who want one and represent employees who currently lack pension coverage.

Finally, we will review the legislation that regulates the other pension systems in the country in order to avoid distortions.

But we also must accept the fact that our society is changing in terms of its demographics, which places increasingly greater demands on the pension system.

As such, we must change the parameters used to estimate pensions and ensure that the system is not only just, but also sustainable.

Here solidarity not only means supporting the weakest. It means that all of us, both men and women, must make more of an effort.

Some people develop careers as employees while others go through periods during which they work independently. That is normal, but we must ensure that they are integrated into the pension system and that they both enjoy its benefits and are subject to its obligations. With this in mind, we will gradually require them to contribute.

We will use a single mortality table and end discrimination that affects women’s pensions.

My dear Chileans,

We must undertake these changes without delay. The people are demanding this of us, and there is a broad agreement among the experts and stakeholders involved that this must be done.

This is not only a task for today. It is a key piece of the construction of the country that we want to create. We should build it on truly cooperative foundations that do not place all of the burden on an individual in an isolated manner and abandon them when they fall behind.

As such, we must base the changes to the pension system on a major national pact. A pact that gives it a foundation, incorporates the best ideas and that will fairly distribute the benefits and responsibilities of our shared efforts.

We will do so carefully and responsibly, of course, because we are not simply offering another new proposal. We want a good system that is sustainable now and for future generations.

We must all participate in facing this national challenge.

As President, I will make every effort to promote broad agreement. In the near future, I will initiate conversations with workers, business owners, academics and representatives of civil society and the political realm –including both the government and the opposition- in order to develop a proposal for a wide-ranging agreement.

And I expect everyone to act with the generosity required to build our shared future.

Now is the time to leave our political differences aside. The great majority of the public is demanding that our social security system be at the level of the fair and democratic country that we have promised to build.

Chile belongs to everyone. Chile should be a community for everyone. Let’s build it together.

Thank you, and good night”.