Should Chile’s Pension System Be Nationalized?
Chilean opposition senators on May 13 introduced legislation to nationalize the country’s pension system. The lawmakers brought the measure forward as a constitutional amendment, sending it to the chamber’s constitutional committee. Should Chile’s pension system be nationalized? How would such a move affect current and future retirees? What chance does the proposed nationalization have at passing?
Alfonso De Urresti, Chilean senator and co-sponsor of the pension system nationalization bill: “Pension Fund Administrators (AFPs) are a failed system in Chile. Our country must move toward a real social security system. Under the promise of various benefits of capitalization and individual savings, the dictatorship in 1981 established a pension system based on access to compulsory savings and insurance markets. However, for more than 39 years, we have seen that the AFPs allow their controllers to obtain millionaire profits and generate for them tremendous economic power through the capital market, one that does not translate into better pensions for our citizens. Our pension system has no elements of community sustainability. It barely offers benefits in accordance with individuals’ ability to save and displaces those who were unable to contribute. The AFPs deliver to each individual the value of their contributions under the logic of an individual contract, relegating the majority that does not have optimal conditions to generate relevant savings. This leads to older adults who retire through the AFPs ending up with insufficient and miserable pensions. We propose the repeal of Decree Law 3,500 of 1980 by which the AFPs were created. To replace it, we propose the creation of a Solidarity Pension System, which includes a universal basic pension, old-age pension, disability pension and survival pension. In addition, a solidarity basic pension system and a universal basic pension will be established. The system will be financed on…”Read More
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