The road to get the National Congress to adopt the project presented by the Government was long and difficult. Although the reform is far from the initial proposal, it is considered a historic milestone. The initiative received 110 votes in favor against 38 in the Chamber of Deputies and must be reviewed by the Constitutional Court before being promulgated by Chilean President Gabriel Boric.
The initiative will benefit some 2.8 million senior citizens with a salary increase between 14 and 35 percent. In addition, almost a million women will receive fair compensation by equaling their pensions to men’s. The Universal Guaranteed Pension (PGU), given to people aged 65 or older who do not receive any pension, will increase to 250 thousand pesos (about 248 dollars). The benefit will include those who are exonerated, and those who lost their jobs for political reasons during the dictatorship of Augusto Pinochet (1973-1990).
Thanks to the initiative, Chile will have a truly mixed system with three pillars of contribution: the State’s contribution through the PGU, personal savings and, for the first time, employer contributions.
The law maintains the Pension Fund Administrators (AFP), created in 1980 during the dictatorship. It has been held responsible for profiting from workers’ savings and giving out miserable pensions to members. However, it does introduce important changes to the control of the AFP by allowing public tenders and the entry of new actors, generating greater competition and cost reduction for its members. “The AFPs exerted a lot of pressure to prevent this reform from being approved,” the Chilean president said in an address to the nation.
Before the vote, the American Council of Life Insurers, a group that brings together the main American insurance companies, said that the reform “puts international free trade agreements at risk” and constitutes an “expropriation.”
The Minister of Labor and Social Security, Jeannette Jara, and the head of the General Secretariat of the Presidency, Álvaro Elizalde, reminded the AFPs that “the contributors, the workers, are not anyone’s property.” For Jara, the bill’s approval opens the doors blocked for 40 years by the AFPs.
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