The President of Chile, Gabriel Boric, during an appearance. Presidency of Chile EFE
The Chilean president, Gabriel Boric, has announced tonight through a national network his long-awaited project of reforms to the pension system, one of the great pillars of his government program that aims to solve one of the structural problems with the greatest impact in the quality of life of citizens: low pensions compared to the standard of living that citizens have in their active stage.
The left-wing president has done so almost eight months after arriving in La Moneda last March and precisely when his Administration is facing complex political moments, after the defeat of the new Constitution project in the September 4 plebiscite, which both Boric and the ruling party supported.
It is a profound project that, among other issues, would mean the end of the Pension Fund Administrators, the AFPs,
“The AFPs, in this reform, are finished.
There will be new private investment managers with the exclusive purpose of investing pension funds and, in addition, there will be a public alternative, which will allow competition to be promoted with the entry of new actors," the leftist president assured tonight about his proposal, which was will discuss in Parliament.
If approved by the congressmen – Boric does not have a majority in any of the chambers – Chile would have a mixed pension system, based on the principles of social security in which the State, employers and workers contribute, as explained tonight by the president and, after the national channel, his main ministers in the rush hour of the television news.
“We want to leave behind an extreme system in this way,
The head of state, who has a 26% popularity according to the Cadem pollster, which measures it week by week, has made different political nods in this message.
He recalled that this is the third attempt by a government to modify the pension system, because the previous two, that of Michelle Bachelet and Sebastián Piñera, failed: "We have no right to continue making them wait, it is not acceptable," he assured in reference to the inability of the political class to provide a solution to the pension problem.
But he added that his bet includes what was discussed in previous Administrations and, therefore, does not start from scratch.
In reference to the main citizen demand today, 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.
"This reform, in particular, is central to our task of providing certainty and guaranteeing social security to all our compatriots," assured the 36-year-old president, who announced that "the great objective with this reform is to increase the amount of pensions in as long as this is law”.
Boric recalled that 72% of pensions in Chile are below the minimum wage and that one in four retirees receives a pension that is below the poverty line.
"This occurs at the same time that the AFPs receive tremendous profits, although the results and profitability of the funds are negative," said the president, who gave examples with specific cases.
“A woman or a man who contributed half of their working life with a salary of 400,000 Chilean pesos [about 423 dollars], today receives a pension of 257,000 and 268,000 pesos, respectively [between 272 and 283 dollars].
If this reform is approved, their pensions will immediately exceed 390,000 [412 dollars]”, which, he said, would increase 46% for men and 52% more for women.
In the 15 minutes of televised message, the president who will govern until March 2026 tried to clear the ghosts that worry people.
Boric assured that the new system will recognize and reward the effort of work throughout life;
that pension savings in individual accounts –both accumulated and future ones– will remain individual property, may be inherited and will never be expropriated;
and that the system will provide freedom to choose who will invest the pension funds, "an option that does not exist today, since we are all obliged to be in an AFP."
Boric spoke of a pension system that, today, is based almost exclusively on individual capitalization and that has proven to be tremendously insufficient.
"Rather than having a social security system, what we have today in Chile is a system that manages your savings and where everyone is saved as best they can," said the president, who will propose "a new Social Security that will be financed through a contribution by employers, which will gradually increase to 6%, thus improving everyone's pensions," Boric explained.
Along with pointing out that this insurance will cover pension gaps and will recognize the work of domestic and care work, among other issues, the Chilean president explained that the monthly retirement will then be made up of three pillars:
the individual capitalization system through mandatory contributions belonging to each worker;
the contribution from Social Security, of 6%, which the workers will have to pay;
and the contribution made by the State through the Universal Guaranteed Pension (PGU), which will be increased with this reform to 250,000 [264 dollars], once the Government manages to carry out its tax reform.
For the economist and former Superintendent of Pensions, Guillermo Larraín, what President Boric has announced tonight "structurally points to the same thing that has been proposed and to the center-left governments from 2014 onwards", although "a little stronger in the language".
He explains: “The president said that the AFPs are ending, but what is ending is not the private administration, but rather the name of the entities in charge of the financial management of the resources is changed and it is transferred to an autonomous state entity. , apparently – the management of administrative accounts”, assures the academic from the University of Chile Faculty of Economics.
Larraín comments that the proposal would be in a correct line, in his opinion, although it will be necessary to read the details of the text that will reach Congress.
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