Chilean President Gabriel Boric has signed a pension reform law to modernize the retirement system established during the Pinochet dictatorship. Effective in September 2025, the reform includes contributions from workers and employers, promising to boost pensions for 2.8 million seniors, addressing inadequacies in the current AFP system. The law signifies a collective political achievement, aimed at eliminating gender disparities and enhancing equity in pension payouts.
Chilean President Gabriel Boric Font has enacted significant pension reform intended to modernize the retirement system that has been in place since the dictatorship of Augusto Pinochet from 1973 to 1990. This new law, set to take effect in September 2025 and fully implemented by 2035, establishes a mixed pension system that includes contributions from workers (10%), employers (8.5%), and a new government-backed social security initiative. This approach aims to elevate pensions for approximately 2.8 million senior citizens by 14% to 35%, countering the currently inadequate payments that average around US$ 350 per month for half of the country’s retirees, given that the minimum wage is US$ 500.
The Chilean Government emphasized that “the Pension Reform is the most important advance in pension matters in the last decades,” highlighting its establishment of a new contributory social security system, enhancement of the Universal Guaranteed Pension, and provisions for compensations reflecting women’s longer life expectancy. President Boric acknowledged the collaborative effort behind the reform’s approval, noting, “This is a collective achievement. Its approval was transversal, by a majority, and it also gives a signal to the country that Chile is moving forward by working together.”
This legislative change also addresses gender disparities in pension payouts, recognizes paid and unpaid work equally, and introduces increased competition among pension fund administrators (AFPs) by permitting public bidding and new entrants, ultimately reducing costs for workers. President Boric stated, “This reform will allow the biggest increase in pensions in the last decades,” indicating a shift from the previous model focused solely on worker contributions toward one that integrates employer contributions as well, aligning Chile with international standards.
The pension reform was passed on January 30, following more than ten years of failed attempts and attributed to successful negotiations with opposition parties, particularly the center-right Chile Vamos coalition. Finance Minister Mario Marcel praised the cooperation across political lines, acknowledging the efforts of legislators who navigated significant pressures to support this reform. “It is important to recognize those who were willing to listen,” Marcel expressed while honoring colleagues from both sides of the aisle who contributed to the reform process.
The AFP system, which was introduced in 1981, faced mounting criticism for prioritizing profits for fund administrators while providing inadequate pension benefits. This reform represents a vital achievement for President Boric’s leftist government as it strives to fulfill longstanding calls for a more equitable pension system as he approaches his final year in office.
In conclusion, the enacted pension reform by President Gabriel Boric represents a pivotal change in Chile’s retirement system, transitioning from a model that has faced significant criticism to one that incorporates collective contributions from workers, employers, and government support. This reform is seen as a triumph for Chilean citizens and stands as a collaborative effort among diverse political factions, marking a significant step towards equity in pension disbursements and addressing long-standing socio-economic challenges.
Original Source: en.mercopress.com
