What Changes Are Needed in Chile’s Pension System?

Sebastián Piñera, who returned to Chile’s presidency earlier this month, is eyeing reforms to the country’s pension system. // File Photo: Chilean Government.

Chilean President Sebastián Piñera will present lawmakers a proposal to reform the country’s Pinochet-era pension system in the first half of this year, his labor and social security minister, Nicolás Monckeberg, said in a recent newspaper interview. Low payout amounts and an aging population mean the private pension system needs urgent changes, said Monckeberg. How well is the system functioning now, and what are the main changes it should undergo? How much legislative and public support will exist for reforms? To what extent will former President Michelle Bachelet’s plan for pension reform, such as measures to boost competition among private pension fund managers, or AFPs, be incorporated into Piñera’s reform?


Kathleen C. Barclay, former president of the American Chamber of Commerce in Chile: “Chile’s fully funded private pension system has been successful in generating attractive returns to participants and has been a pillar of the country’s economic success, providing the base for the development of the long-term capital markets and related investment to spur economic growth, resulting in a robust middle class. But the private pension funds, whose role is to effectively manage money invested, were never designed to be a comprehensive solution for the pension needs of all Chileans. Proposals to boost competition are welcome but will not resolve the underlying issues related to providing for adequate pensions. The country’s aging population indicates that new thinking and action is required. Recently, the OECD has recommended considering raising the retirement age (including making the retirement age for women the same as for men), as well as increasing the level of savings (current levels of savings at approximately 10 percent need to be increased significantly). Additionally…”

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