Significant Pension Reform Enacted by President Boric in Chile

President Gabriel Boric has enacted a pension reform in Chile, effective from September 2025, aimed at enhancing retirees’ pensions by 14%-35% through a mixed contribution system. This law seeks to improve the poorly rated AFP system, eliminate gender disparities, and secure bipartisan support. Ultimately, it aims to modernize and enhance the efficacy of the Chilean pension framework for millions of citizens.

Chilean President Gabriel Boric Font formally enacted a pension reform on Thursday, marking significant changes to a system that has been in place since the military dictatorship of Augusto Pinochet (1973-1990). This reform will commence in September 2025 and reach full implementation by 2035, introducing a mixed pension system comprising contributions from workers, employers, and a new social security framework. It aims to enhance pensions for 2.8 million elderly citizens by 14% to 35%, as current pensions from private Pension Fund Administrators (AFPs) average around US$ 350 monthly, while the minimum wage is US$ 500.

The Chilean Government described the reform as a crucial advancement in pension policy, stating, “The Pension Reform is the most important advance in pension matters in the last decades.” The initiative enhances the existing Universal Guaranteed Pension, offers benefits for years of contributions, and compensates for women’s increased life expectancy. President Boric remarked during the signing ceremony that the reform represents a collective achievement and noted past challenges in reaching agreement among different governments over a decade to improve the pension system.

The reform also aims to eliminate gender disparities, acknowledge both paid and unpaid labor, and foster competition among AFPs. This will be accomplished through public bidding and welcoming new market entrants, which should lower costs for workers. President Boric emphasized that this overhaul represents a fundamental shift in pensions, as it moves away from a worker-only contribution structure to one that includes employer contributions, aligning Chile more closely with international standards.

The law received bipartisan support, having been passed on January 30 after years of failed attempts for reform, partly due to collaboration with the opposition coalition Chile Vamos. Finance Minister Mario Marcel expressed gratitude to lawmakers from Chile Vamos for their willingness to engage across party lines despite facing considerable opposition. The AFP system, established in 1981, has been long criticized for prioritizing the interests of pension administrators rather than ensuring sufficient benefits, leading to widespread protests. This reform is considered a major victory for President Boric’s administration, addressing a long-standing demand for a fairer pension system as he approaches his final year in office.

In conclusion, President Gabriel Boric has successfully signed into law a long-anticipated pension reform that seeks to address inadequacies in Chile’s pension system established during the Pinochet era. This new law introduces a mixed contribution model, boosts pensions for elderly citizens significantly, and aims to reduce gender disparities. It marks a collaborative legislative achievement amid political challenges, illustrating a shift towards fairness and competence in pension management in Chile.

Original Source: en.mercopress.com