Chilean President Sebastian Pinera is pitching a new plan to appeal to pension protesters’ demands throughout the country.
Residents have protested for months that their pensions defy normal living standards, and generally come up well below the minimum wage despite their lifelong contributions to the pensions. Public demonstrations detesting the country’s pension have left scores of citizens dead, injured and arrested.
To help alleviate the situation, President Pinera proposed a 3% increase in contributions to the country’s pension system and Pension Fund Administrations (AFPs). He also urged a 3% boost towards pools of capital to improve pensions both now and in the future, called the Collective and Solidarity Fund.
“Within 6% we have opted for a [solution where] half goes to the individual account, to the pension savings of each worker to finance their own pension, the other half to a Collective and Solidarity fund to improve the pensions of the sectors more vulnerable,” the president said in announcing the proposal.
The aggregate 6% in new contributions would be sourced from the employers. If enacted, President Pinera promises pensioners now and in the future, would be sustained above an impoverished quality of life. Any pensioner who has contributed at least 30 years of payments will not receive benefits payments lower than the country’s minimum wage.
The president’s proposals also include several changes to the current AFP system. Under the proposal, fund managers would be mandated to refund part of the commissions charged in case of negative returns to the funds. They also will be prohibited from charging commissions for investments in national mutual funds. It also opens the door to new players such as non-profit entities, and facilities greater participation by affiliates.
According to President Pinera, these new stipulations are expected to increase pensions by approximately 30%.