La Jornada – Borić proposes to abolish the pension system in Chile

Santiago. Chilean President Gabriel Boric unveiled a bill on Wednesday evening that would abolish private pension fund managers (AFPs) and replace them with a new mixed system that increases pension amounts.

In a televised message, Borić made one of his biggest pre-election promises: to abolish the system created in 1981 by the Pinochet dictatorship (1973-1990), a pioneer in the world in establishing absolutely individual capitalization of workers.

“The AFPs, in this reform, are finished,” said Borić.

The model of the Chilean AFPs is the basis of Mexico’s pension system, known as Afore, established on July 1, 1997 in the country, through which private companies manage workers’ contributions to their pensions.

According to the left-wing president, the pensions of all people will be substantially improved through the new mixed system. With the current system, 72 percent of pensions are less than the minimum wage (about $400), he said.

The contributions will go to a social insurance fund that will improve pensions

The proposal of Borić’s government, which would enter the Congress next week – where it does not have a majority – will retain the pillar of individual savings, which currently averages 10.5 percent of the salary, and adds 6 percent to the burden of the employer, which until now has not been without involvement.

The new employer contribution “will go into a social security fund that will improve pensions for everyone, especially women who are most affected by the current system,” it explained.

AFPs will be replaced by a mixed pension system, with a public investment manager and private actors.

“The current pension system is in crisis and no one doubts that. Today’s pensions are not enough for our fathers, mothers, grandfathers and grandmothers to maintain a decent life in their old age, regardless of how much they worked during their lives,” said Borić.

After the adoption of the text, the new mixed system would allow significantly higher pensions than the current ones.

The president gave the example of a salary of 400 thousand pesos (about 423 dollars). In the case of men, the pension amount will increase by 46 percent, and for women by 52 percent.

The new pension system proposed by the government will be financed with the funds it hopes to collect through tax reform – a pillar of Borić’s social reform program – which the president already sent to Congress last July and which aims to capture 3.6 percent of the gross domestic product. (GDP) of the country. (With information from the Editorial Office)

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