Chile's President Sebastian Piñera on Tuesday announced a reform to the pension system that supposedly would benefit 2.1 million people.
Chile to Mark the First Anniversary of its Social Outbreak
"From now on, no one will receive pensions below the poverty line," Piñera said, without acknowledging that his administration has ignored several bills submitted to increase pensions.
His reform proposes to strengthen the state's role in the payment system, increase the current retirees' pensions, and boost savings for future pensions.
Boosting the state-fundedSolidarity Pillar'
The government program that provides economic benefits to retirees, known as the Solidarity Pillar, will cover 80 percent of the population, instead of the 60 percent currently established.
Basic pensions supposedly would be equalized to the poverty line so that no pensioner receives less than US$ 250 per month.
Promote the 'Individual Savings Pillar'
Piñera proposes to increase employer-paid contributions by up to 6 percent. This economic contribution will be administered by an Autonomous Public Institution, not by the Pension Fund Administration (AFP) private system, which was inherited from Augusto Pinochet's dictatorship (1973-1990)
"Retirees who have a minimum number of contributions will receive an increase in their pensions," Piñera said and added that those women who have contributed for at least 8 years will receive an increase of US$110 per month.
New Minimum Pension Guarantee
Piñera also vows that all new pensioners who have contributed for 30 years will have a pension equal to or higher than the current minimum wage (US$445).
Subsidy for dependent pensioners
If the reform goes into effect, the government will also provide economic support to people over 65 years old who require a caretaker who assists them in their daily living activities. This insurance will guarantee an additional pension of at least US$120 per month.
Those severely dependent pensioners living in vulnerable conditions will also receive an additional benefit of between US$80 and US$100 per month.
Increased competition and new regulations for AFPs
The reform will allow the creation of not-for-profit AFPs. Those that cannot become financially sustainable within one year must return up to 20 percent of the commissions charged to their clients.