Chilean President Gabriel Boric has signed a significant pension reform law, effective from September 2025, which introduces a mixed contribution system aimed at boosting pensions for 2.8 million retirees. The changes will address low payouts, rectify gender disparities, and enhance competition among pension fund administrators. The reform has garnered support from across political lines, marking a major win for Boric’s administration.
On Thursday, Chilean President Gabriel Boric Font enacted a significant pension reform that alters the retirement system which has been in place since the military dictatorship of Augusto Pinochet (1973-1990). This new legislation, effective in September 2025 and fully operational by 2035, introduces a mixed system comprising contributions from workers (10%), employers (8.5%), and a new state-supported social security element. This reform aims to increase pensions by 14% to 35% for approximately 2.8 million senior citizens, addressing the current low payouts from privately-managed Pension Fund Administrators (AFPs). Indeed, about half of Chile’s retirees receive a mere US$ 350 per month, while the minimum wage stands at US$ 500.
The Chilean Government noted, “The Pension Reform is the most important advance in pension matters in the last decades. This initiative creates a new contributory Social Security, improves the Universal Guaranteed Pension, establishes benefits for years of contributions, and compensation for women’s life expectancy.” During the ceremony introducing the reform, President Boric remarked, “This is a collective achievement. Its approval was transversal, by a majority, and it also gives a signal to the country that Chile is moving forward by working together.”
This law also addresses gender disparities, acknowledges both paid and unpaid labor, and aims to enhance competition among AFPs. The changes facilitate public bidding and permit new entrants into the system, ultimately lowering costs for workers. President Boric characterized this reform as the most significant advancement in pensions for decades, emphasizing a transition from a solely worker-funded model to one that includes employer contributions. He stated, “This reform will allow the biggest increase in pensions in the last decades.”
Passed on January 30 after more than ten years of unsuccessful attempts, this reform achieved a rare consensus with segments of the opposition, notably including the Chile Vamos coalition. Finance Minister Mario Marcel expressed gratitude towards the Chile Vamos lawmakers for their willingness to transcend political boundaries during challenging circumstances. He said, “It is important to recognize those who were willing to listen,” thanking those from the Labor and Finance Committees who supported the reform despite pressures.
The AFP system, implemented in 1981, faced criticism for benefitting administrators while providing inadequate pensions, leading to persistent public protests. This reform represents a substantial victory for Boric’s leftist government as he enters his last year in office, fulfilling a long-anticipated desire for a more equitable pension system.
In conclusion, the recent pension reform signed into law by President Gabriel Boric marks a critical step towards amending Chile’s retirement system, which has been in effect since the Pinochet era. This transformation seeks to enhance pension payouts significantly for millions of retirees and addresses long-standing gender disparities and inequities in the existing framework. The collaborative efforts across political lines culminated in this legislative victory, highlighting the importance of unity in advancing social reforms.
Original Source: en.mercopress.com
