INSUBCONTINENT EXCLUSIVE:
Lawmakers approved a gradual increase in employer pension contributions, set to reach 8.5% of employee taxable income over nine years.Of
this, 4.5% will go to individual accounts, 1.5% to a protected profitability fund, and 2.5% to social security
The reform aims to address persistent problems: low pension payouts, weak competition among fund managers, and gender gaps in retirement
income.The Chilean system, established in 1981, relies on mandatory individual savings managed by private pension fund administrators (AFPs)
It was once hailed as a model for other countries, but over time, it exposed structural weaknesses.Many retirees, especially women and
informal workers, receive low pensions
Only about one-third of contributors achieve replacement rates near the originally promised 75%.For others, irregular work histories or low
wages mean insufficient savings and, often, no access to state guarantees
Realities Behind the Numbers
(Photo Internet reproduction)These new funds, tailored by age group, will automatically adjust risk as workers approach retirement
Regulators will set reference portfolios and reward or penalize AFPs based on how closely their returns match these benchmarks.This change
intends to push AFPs toward better long-term performance and away from short-term herd behavior
sovereign and foreign assets, but AFPs will gain more freedom to seek higher returns
The cap on alternative investments, currently at 20%, may rise, further diversifying portfolios.These moves could deepen local capital
markets and attract new players, as the reform lowers entry barriers and allows new administrators to outsource administrative tasks.The
New benefits target low-income workers and women, seeking to close persistent gaps.Projections show pensions could rise by 14% to 35% for
many, affecting over 2.8 million people
However, business groups warn that higher employer costs may reduce formal employment and wages, especially for small firms and vulnerable
