Chile reforms its funded pension system

By Valentin Hamon-Beugin , Santiago, Chile

Published on February 23 at 7:41 p.m. , updated on February 23 at 7:41 p.m.

Chilean President Gabriel Boric Ivan Alvarado / REUTERS

ANALYSIS - Left-wing President Gabriel Boric promises to increase pensions, 72% of which are lower than the minimum wage. He introduces employer contributions.

The pension reform recently adopted by the Chilean Parliament is considered historic. Over the past fifteen years, former presidents Michelle Bachelet and Sebastian Piñera have both tried to fundamentally change the model adopted in 1981 under the dictatorship of Augusto Pinochet . In vain. It took the government of the current head of state, Gabriel Boric , more than two years of tough negotiations to partially overhaul this system based on private capitalization. In concrete terms, workers must pay around 10% of their salary to pension fund management companies (AFP), which are supposed to grow their savings by making investments in the financial markets.

Although they originally promised very high recovery rates, the AFPs' results have not been forthcoming. Indeed, 72% of pensions are now lower than the minimum wage, which is just over 500 euros...

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