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By Tom Azzopardi
Aug. 10—The Bachelet government is planning to send legislation to Congress this year to introduce changes to the pension system amidst growing discontent over the benefits paid out by Chile's pioneering privately administrated scheme.
The government has called parties from the ruling Nueva Mayoría coalition to a meeting on Aug. 18 to discuss proposals.
The bill would join legislation already in Congress to create a state-owned pension fund administrator (or AFP from its initials in Spanish) to compete with the six current private-sector funds, including those of Metlife and Principal Financial Group.
In the 1980s, Chile instituted what was then a revolutionary private-contributions pension system, a model that has been emulated by a dozen countries around the world, including Argentina, Poland and Peru. At the end of June 2016, Chile's AFPs controlled assets worth approximately 111 billion pesos ($170 million).
The system is not universally popular with employees and retirees, however, and President Michelle Bachelet's reform proposals follow huge marches on July 24 demanding an end to the AFP system and its replacement by a tax-funded pension scheme, an alternative Bachelet dismissed Aug. 6 as prohibitively expensive given Chile's aging demographics.
“The pensions issue must be debated seriously and in a sustainable manner,” said government spokesman Marcelo Diaz on Aug. 8.
As part of this debate, government ministers will reexamine proposals made last September by a presidential advisory commission led by economist David Bravo. These included lifting the retirement age for women to 65 (the same as men), extending coverage of a tax-funded solidarity pension and increasing contributions from 10 percent to 14 percent of gross income with the difference being covered by employers.
The government had shelved plans to implement the commission's recommendations as it struggled with a slowing economy, rising public deficit and a complex education reform, but the issue was forced back to the top of the agenda by last month's marches, which brought hundreds of thousands of people into the streets.
Pensioners plan to march again on Aug. 21.
To contact the reporter on this story: Tom Azzopardi in Santiago at email@example.com
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For more information on Chilean HR law and regulation, see the Chile primer.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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