President Piñera submits proposed legislation to improve pensions, focusing on women, the middle class and severely dependent people
The initiative will benefit more than a million pensioners and will gradually increase social security contributions from the current 10% to 16%. Pensions will improve by between 20% and 32%.
This Wednesday, President Sebastián Piñera submitted a reform proposal to improve pensions that focuses on women, the middle class and severely dependent senior citizens.
The reform creates a 3-prong social security system: Solidarity Pensions funded by the State; Individual Savings funded by employers and workers; and Collective and Solidarity Savings funded by employers with an initial contribution by the State.
The reform includes a gradual increase of 3% paid by the employer to complement each worker’s individual pension savings. Under the plan, pensions would increase 30%.
Furthermore, it establishes another gradual increase of an additional 3%, paid by the employer into a Collective and Solidarity Savings Fund that will provide additional income to current and future pensioners. The new fund will especially benefit women, the middle class and severely dependent senior citizens.
Once the reform has passed, male pensioners who have made a minimum number of contributions will see their monthly pensions increase by 2 UF (56,600 Chilean pesos or around US$73). The average increase of 20% will benefit more than 500,000 pensioners. Women will see their monthly pensions increase by 2.5 UF (70,800 Chilean pesos or around US$91), benefiting more than 350,000 pensioners with an average increase of 32%.
The funds from this additional social security contribution of 6% will be administered by an Autonomous Public Institution.
Additionally, in very exceptional cases, like terminal illness, life expectancy will be recalculated to allow early withdrawal of a portion of pension savings.
This proposal is in addition to the recent reform, which increased Solidarity Pensions by 50%, and is fully operational, benefiting more than 1.6 million pensioners.
Together, these reforms would guarantee that no pensioner lives below the poverty line and that the pensions received by those who have contributed to the system for 30 or more years are always above the current minimum wage, as expressed in UF.