On Wednesday, President Sebastián Piñera presented a bill to improve pensions, with a focus on women, the middle class and people dependent on care. The reform will create a Pension System based on three pillars: a Solidarity Pillar, financed by the state; Individual Savings, financed by employers and employees; and Collective and Solidarity Savings, financed by employers with an initial state contribution.
The reform will gradually introduce an additional 3% contribution, paid by the employer, to complement each employee’s individual savings. Once in full operation, this will increase pensions by 30%.
In addition, it will gradually introduce a further additional 3% contribution, paid by the employer, that will go into a Collective and Solidarity Savings Fund to complement current and future pensions, benefiting especially women, the middle class and senior citizens who are dependent on care.
Once the reform has been approved, the current pensions of men, who have made a minimum number of contributions, will rise by 2 Unidades de Fomento (UF) per month (56,600 pesos), representing an average 20% increase that will benefit over 500,000 pensioners. In the case of women, the increase will be 2.5 UF per month (70,800 pesos), representing an average increase of 32% and benefiting over 350,000 pensioners.
The resources arising from this additional 6% contribution will be managed by an Autonomous Public Institution.
In very exceptional cases, such as a terminal illness, life expectancy will be recalculated and people will be allowed to withdraw part of their pension savings ahead of time. This bill is in addition to the reform approved recently under which pensions paid through the Solidarity Pillar increased by 50%. This latter reform, which is in full operation, has benefited over 1.6 million pensioners.
These reforms guarantee that no pensioner will fall below the poverty line and that the pensions of those who have contributed for 30 years or more will always be above the current minimum wage, expressed in UF.