Maria Eugenia Jiménez, executive director of the pension consultancy Brain Invest.
Having decent pensions is one of the main concerns of Chileans, as was strongly expressed in the October 2019 protests, and the winning presidential candidates of the first round offer two antagonistic models to face this demand.
While José Antonio Kast proposes to maintain the individually funded system and the AFPs, Gabriel Boric wants to end these administrators and create a new tripartite, solidary and public system.
In a more detailed look at the programs of both candidates in pension matters, Kast establishes the entry of other financial entities to the administration of savings; the gradual increase in the contribution of 5% of the employer’s charge; promote APV for the middle class with greater contributions from the State; increase the coverage of the Solidarity Pillar to 80% of the population over 65 years of age with fewer resources; a guaranteed minimum pension financed with fiscal resources; increase the Basic Solidarity Pension and the Maximum Solidarity Contribution Pension by 20%; increase the pension age for women to 65 years, modify the AFP regulations so that they cannot charge commissions when the profitability of the funds is negative, and allow the total withdrawal of savings to those with up to 5 years of contributions.
Boric, on the other hand, defines that the new contributions will be invested in an autonomous public body; a Universal Basic Pension of $ 250 thousand for each pensioner of the reformed system from the age of 65, whether they have contributions or not; increase in the contribution by 6% at the expense of the employer; elimination of the tax ceiling; a table of equal life expectancy for men and women; allow voluntary savings to be used to increase the pension that it will finance with its contributions and collective profitability, which would be pre-defined; the creation of subsidies for unpaid work and periods of unemployment, and that the companies in which the pension funds are invested must have representatives of the affiliates who will be democratically elected
As we can see, the Kast program maintains the current system with some changes and Boric’s program makes a shift to a model in which the worker “will no longer have ownership over the new savings, but will have the right to social security”, as clarified the candidate’s pension advisor, Claudia Sanhueza.
It is inevitable that major reforms to the current system will be carried out, since it has been shown that people with low-density contributions do not finance a minimum pension and those who impose for a longer time continue to receive low pensions. The current numbers are not enough. A contribution rate close to 20% is required, with the increase in the contribution of workers and employers, unemployment subsidies so that workers do not stop imposing and changing the calculations of people’s life expectancy.
For whatever pension system that governs us is to have legitimacy, it is important that the pensions of the middle class and the most vulnerable sector improve, through the Solidarity Pillar
The big question is whether there will be the resources to make this happen and whether or not the new Congress that will debut in March will vote in favor of the proposal of whoever is the next President of the Republic, and therefore, whether progress will be made in reaching the promise of having decent pensions or it will only remain in that, in a promise.