Chilean President Gabriel Boric Font has signed a new pension reform law aimed at overhauling the existing system from the Pinochet era. Effective from September 2025, the reform introduces a mixed funding model and seeks to enhance pensions for 2.8 million seniors. The initiative is seen as a collaborative achievement, aiming to address gender disparities and increase competition among pension fund administrators.
Chilean President Gabriel Boric Font has enacted a transformative pension reform law, which will revamp a system in existence since the Pinochet years. Effective September 2025, the reforms introduce a mixed system incorporating worker contributions (10%), employer contributions (8.5%), and a new state-backed social security component. The aim is to enhance pensions by 14% to 35% for 2.8 million seniors, addressing the current low payouts from privately managed Pension Fund Administrators (AFPs), which average only US$ 350 monthly against a minimum wage of US$ 500.
The Chilean Government heralded the reform as a significant advancement in pension legislation, stating that it creates a new contributory social security system and improves the Universal Guaranteed Pension. In addition, it provides benefits for years of contributions and compensates women for their longer life expectancy. During the signing ceremony, President Boric emphasized the collaborative nature of the achievement, stating, “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.”
The new law seeks to eliminate gender disparities, acknowledge both paid and unpaid work, and stimulate competition among AFPs through public bidding and new entrants. This change is heralded as a pivotal move aligning Chile’s pension system with international standards. President Boric further remarked that the reform “will allow the biggest increase in pensions in the last decades.”
Passed on January 30, the pension reform was a culmination of over a decade of stalled efforts, achieved through bipartisan cooperation, including with the center-right coalition Chile Vamos. Finance Minister Mario Marcel praised this political collaboration, acknowledging the efforts of lawmakers across party lines, stating, “It is important to recognize those who were willing to listen.”
The AFP system, introduced in 1981, faced widespread criticism for benefiting administrators while offering inadequate pensions, which led to significant public unrest. This reform represents a critical success for President Boric’s administration and marks a fulfillment of a long-standing desire for a fairer pension system as he approaches the end of his term.
In summary, President Gabriel Boric’s pension reform signifies a major overhaul of Chile’s pension system, aimed at enhancing retirement benefits for millions. The new law, incorporating a mixed funding model, also strives for gender equality and reduced costs for workers, while fostering bipartisan cooperation. This reform not only addresses long-standing demands for better pensions, but also delineates a historic shift in the country’s social security landscape, positioning Chile to meet modern standards.
Original Source: en.mercopress.com
