Saturday, 25 May 2019

Chile’s Piñera gives details of his pension reform plan

Press Release by Chile Government

The President made a national chain on Sunday to share the main proposals of the project, which aims and main motivation to give a new and better treatment to the elderly.

In addition, the program aims to strengthen the contributory and solidarity pillars in order to improve current and future pensions for the most vulnerable groups, the middle class and women.

During the afternoon, the Head of State held a meeting with the political committee and received presidents and parliamentarians from Chile. We are going to La Moneda to discuss the main axes of the proposal.

Next, the message of President Sebastián Piñera and the main measures:

Santiago, October 28, 2018

Dear compatriots:

The priorities of our Government are the priorities of all Chileans: citizen security, jobs, salaries, health, education and a new and better treatment of our children, our middle class, our regions and our seniors, so that the Best Times reach all Chilean homes.

A new and better treatment for our senior citizens is the main objective and motivation of this pension reform project, which we share today with all our compatriots.

This mission becomes more urgent when we see that our population is aging, because every day less children are born, and we have to promote the birth rate. And because every day we live more, and we have to improve the quality of those extra years of life.

Today in Chile there are already 3 million older adults, who, for the first time in our history, exceed the number of our children and young people under 15 years of age.

And today the old age ceased to be the prelude to the other world and we must transform it into a new and fruitful stage of our lives, in which older adults, who may have stopped working, but certainly have not stopped living, can reap With dignity, with joy, with hope what they planted during their lives: their children, grandchildren, family, friends, affections and loves.

We know that today pensions are very low and far below the needs and expectations of our seniors. Today we have 2.8 million pensioners, of which 1.5 million have pensions so low that they need and benefit from the Pilar Solidario, through the Basic Solidarity Pension and through the Solidarity Pension Contribution. Of the beneficiaries of this Pilar Solidario, 62% are women.

Why are pensions so low in Chile?

Basically for three reasons:

First, because the pension savings of only 10% of our salaries is clearly insufficient.

Second, because of unemployment and lack of development, there are too many very large pension gaps and salaries are very low.

And third, because given the increase in life expectancy, the retirement period that must be financed with our pension savings is increasingly extended.

Hence the vital importance of concentrating our efforts on growing with greater strength, on creating more and better jobs, on improving wages and opportunities, in order to increase future pensions.

But also the importance and urgency of giving a new and better treatment to our seniors, requires us to act today fostering a new culture of respect, dignity, affection and integration of our seniors into our society. This requires more integration to their own families, better health, better public transportation, better job opportunities, sport, culture and recreation. Because our seniors have a lot to teach us, and we have a lot to learn from them.

Our Pension System is based on two main pillars: the Contributory Pillar, through which all workers contribute monthly for their pension savings that will finance their future pensions. And the Pilar Solidario, with which the State contributes public resources to increase the pensions of the most vulnerable and most needy groups.

The Pension Reform project that we present today aims to strengthen both pillars: contributory and solidary. Its main objective is to improve current and future pensions, but with a special affection and urgency with those groups that are more vulnerable, with the middle class, with women and with those who voluntarily extend their stay in the world of work, to allow that all our seniors can overcome and leave behind situations of poverty or vulnerability and live their lives with greater quality, greater security and with more dignity.

Chileans and Chileans:

What are the fundamental pillars of this Pension Reform?

First: increase the pension savings of workers, through the additional and monthly contribution of 4% of the salary of each worker, which will be financed by employers. This greater contribution will grow gradually, so as not to affect our ability to create new and good jobs, and on a regimen will mean an increase of 40% in the pensions of all workers.

Second: strengthen the Solidarity Pillar, which will gradually grow to reach 40% and will go from the current 0.8% to 1.12% of GDP, and will mean an increase in public spending to strengthen that Solidarity Pillar close to the USD 1,000 million, which will be financed with greater contributions from the State.

This strengthened Pilar Solidario will allow us to immediately improve the Basic Solidarity Pension and the Solidarity Pension Contribution by 10%, and these will continue to grow depending on the age of the pensioner, up to 50% on the Basic Solidarity Pension and up to more than 70% the Solidarity Pension Contribution.

Third: In addition, the State will provide additional resources to finance a new contribution to the pensioners of the middle class that exceed a minimum of contributions, and that will be increasing with the years of contribution of each worker.

Fourth: This additional contribution to the pensioners of the middle class will be even greater for women, in order to partially compensate for their lower participation in the labor force and their lower salaries, which is often due to motherhood or care of their children. family.

Fifth: The State will also make additional contributions to those who voluntarily postpone their permanence in the labor force and their retirement age. In fact, an additional permanence of 5 years in the labor force increases the amount of the pension by more than 40%.

Half of that greater saving for postponing the retirement age will go to finance the future pensions, and the other half will be able to be retired freely by the people once they are retired, to be able to have it according to their own needs or preferences.

In short, the strengthening of the Solidarity Pillar and the greater contributions that the State will make, will favorably favor the most vulnerable, the middle class, women and those who voluntarily increase their permanence in the world of work beyond age. legal retirement.

This Pension Reform will also increase the workers’ options so that they can freely choose who will administer this additional 4%, through the creation of new institutions, which may be with or without withdrawal of profits, and may also be formed by subsidiaries of Compensation Funds, Savings and Credit Cooperatives, General Fund Administrators, AFP, Life Insurance Companies, etc., which may manage this greater pension savings, subject to the operation and investment rules established by the Pensions Superintendency.

Likewise, this reform will increase competition in the Pension Funds Administration Industry, improving the information to workers and the bids of new members and allowing discounts in commissions based on the size of the group that is incorporated and their commitment to permanence in time, with only one objective: lower costs, lower commissions and improve their pensions.

In our conception, pension savings belong to the workers and, consequently, they and only they have the right to choose who and how to manage their pension savings. This right is not only recognized, but also respected and strengthened by this Pension Reform.

This reform will improve pensions as soon as they enter into force, but since it will have a gradual application, this increase will improve over time, favoring pensioners with lower pensions, with more contributions, with greater priority. age, middle-class pensioners, women and those who voluntarily increase their permanence in the world of work.

Additionally, this Pension Reform contemplates a Solidarity Insurance, which will be financed with an additional contribution of 0.2% of the employer’s charge, to finance an additional and growing pension with age, for those older adults who, due to suffering a severe dependency, physical or mental, are not self-supporting and require special support and help.

Dear compatriots:

We are convinced that this Pension Reform is fair, urgent and necessary, and requires a greater, gradual and growing effort, both from employers who will have to finance 4% of the additional contribution, and from the State, which will have to make a great effort to contribute to the regime additional resources to the world of forecasting, of the order of USD 3,500 million.

This reform will not only increase the pensions of the majority of pensioners, but will be part of our commitment to a New and Better Treatment with our seniors, which is materialized through policies and initiatives such as “Positive Aging” or “Better Adult”, and that will allow all our older adults a more integrated, fuller and happier third age, together with their loved ones.

In this way, in a responsible and sustainable manner from the point of view of public finances, complementing the reform of 2008 and collecting many proposals from different sectors, we are fulfilling our commitment, with our duty to help our seniors to that they can fulfill their dreams, that they can mitigate their fears, that they can develop their talents and guarantee them a third age with a better quality of life, with greater security and with more dignity. It is fair and wise that we treat our elders today, as we want them to treat us tomorrow.

I make a call to all parliamentarians, Government and Opposition, to contribute with a constructive sense, but also with a sense of urgency to this noble and beautiful mission to improve the quality of life of all our seniors.

Thank you very much, good night and may God bless Chile and all Chileans.

This press release was published in English using an automated translation system