President of Chile presents main points of pension reform bill
In a national broadcast, President Sebastián Piñera announced the main proposals included in the reform, which will improve pensions for all Chileans and offers special benefits to the most vulnerable members of society as well as members of the middle class and women.
President Sebastián Piñera presented details of the pension system reform bill, which is designed to improve current and future pensions for all Chileans, especially the most vulnerable members of society, members of the middle class, women and those who voluntarily delay retirement.
The President emphasized that, “This reform will improve pensions as soon as it goes into effect, but given that it will be applied gradually, the improvements will increase over time. This effort will always provide benefits more quickly to those with smaller pensions, those who have made more payments, older people, and members of the middle class, women and those who voluntarily delay retirement.”
Five Pillars
The first proposed pillar of the reform involves an additional monthly contribution equivalent to 4% of each worker’s salary, which will be financed by employers. This will increase workers’ pensions by 40%.
Second, the Solidarity Pillar will be strengthened and will gradually increase to 40% and move from 0.8% to 1.12% of the GDP. “This will allow us to immediately improve the Basic Solidarity Pension and Provisional Solidarity Contribution by 10%, and they will continue to grow as a function of the individual’s age up to 50% of the Basic Solidarity Pension, and over 70% in the case of the Provisional Solidarity Pension,” President Piñera stated on national television.
The third pillar is government provision of additional resources to finance a new contribution to middle class pensions so that they exceed a minimum that will increase based on the number of years that each worker pays into the system.
The fourth pillar is that this additional contribution will be even greater for women in order to partially compensate for their lower level of participation in the labor force and lower salaries.
Fifth, the State also will make additional contributions for those who voluntarily delay retirement. Those who work an additional five years will see an increase of over 40% in their pension.
The pension reform also includes the following changes:
Disability Insurance: Providing special assistance to severely disabled individuals who pay into the pension system in order to help them cover their costs.
Strengthening competition: Giving workers more freedom to manage part of their savings and allowing new entities to participate in the fund management industry.