The President of Chile, Gabriel Boric, during an appearance Presidency of Chile EFE
The President of Chile, Gabriel Boric, this evening announced through a national network his long-awaited project to reform the pension system, one of the major pillars of his government program aimed at solving one of the structural problems with the greatest impact on the quality of life of Switzerland Citizens: low pensions compared to the standard of living of citizens in their active phase. The left-wing president has done so almost eight months after arriving in La Moneda last March and just as his government is about to die after the defeat of the new constitutional project in the September 4th referendum affecting both Boric and the ruling party. faces complex political moments. It is a profound project that would mean, among other things, the end of the pension fund administrators, the AFPs, the private organizations created since 1981 to support the Chilean system, based on individual capitalization and pioneer in the world. .
“The AFPs are at the end of this reform. There will be new private investment managers investing exclusively in pension funds and, in addition, there will be a public alternative that will make it possible to promote competition through the entry of new players,” the left-wing president assured tonight of his proposal, presented in Parliament is discussed. If approved by Congressmen — Boric has no majority in either chamber — Chile would have a mixed pension system based on social security principles, with contributions from the state, employers and employees, the president explains tonight has and , according to the national broadcaster, its chief ministers in rush hour television news. “In this way, we want to leave behind an extreme system that could not meet the expectations placed in it and recognized shortcomings,” said Boric.
The head of state, who has a popularity rating of 26% according to pollster Cadem, who measures it week by week, made various political references in this message. He reminded that this is the third attempt by a government to change the pension system because the previous two, those of Michelle Bachelet and Sebastián Piñera, failed: “We have no right to keep them waiting, it’s not acceptable “, he assured in reference to the inability of the political class to solve the pension problem. But he added that his bet includes what has been discussed in previous governments and is therefore not starting from scratch. Referring to today’s most important citizen demands, the control of public order and the fight against crime, Boric assured that “security in all its dimensions” is the main priority of his government. “It is precisely this reform that is central to our task of creating security and guaranteeing social security for all our compatriots,” assured the 36-year-old President, who announced that “the major goal of this reform is to increase the level of social security increase pensions as long as the law requires it”.
Boric reminded that 72% of pensions in Chile are below the minimum wage and that every fourth pensioner receives a pension below the poverty line. “This is happening at the same time that the AFPs are making huge profits, even though the results and profitability of the funds are negative,” said the president, giving examples with specific cases. “A woman or man who has put in half their working life on a salary of 400,000 Chilean pesos [unos 423 dólares]today they receive a pension of 257,000 and 268,000 pesos respectively [entre 272 y 283 dólares]. If this reform is adopted, the pensions of both will immediately exceed 390,000 [412 dólares]’ which, he said, would increase by 46% for men and 52% more for women.
In the 15-minute televised message, the president, who will rule until March 2026, tried to clear the ghosts that are worrying people. Boric assured that the new system will recognize and reward hard work throughout life; that retirement savings in individual accounts – both accumulated and future – remain individual property, may be inherited and are never expropriated; and that the system offers the freedom to choose who invests the pension funds, “an option that doesn’t exist today as we are all required to be in an AFP.”
Boric spoke of a pension system that is now based almost exclusively on individual capitalization and has proven to be extremely inadequate. “Instead of a social security system, today in Chile we have a system that manages your savings and in which everyone is saved as much as possible,” said the president, who “will propose a new social security funded by a contribution from employers who gradually increased to 6%, which will improve everyone’s pensions,” explained Boric. In addition to pointing out that this insurance will close pension gaps and recognize, among other things, housework and care work, the Chilean President explained that the monthly pension will then be based on three pillars will be structured: the individual capitalization system through the mandatory contributions to which each worker is entitled; the 6% social security contribution that workers will have to pay; and the state’s contribution through the Universal Guaranteed Pension (PGU), which will come with this reform increased to 250,000 [264 dólares]as soon as the government succeeds in carrying out its tax reform.
For economist and former superintendent for pensions, Guillermo Larraín, what President Boric announced tonight “points structurally to the same thing that has been proposed and to the centre-left governments from 2014”, although “a little bit stronger In the language”. . He explains: “The President said that the AFPs end, but what ends is not private management, but the name of the bodies responsible for the financial management of the resources is changed and transferred to an autonomous state body ., Apparently – the administration of administrative accounts,” affirms the scholar from the Faculty of Economics at the University of Chile. Larraín comments that, in his opinion, the proposal would go in the right direction, although it will be necessary to read the details of the text that will be presented to Congress. “It is very difficult for Parliament to pass it and there will probably be quite a big fight,” predicts the economist.
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