Bachelet presents project that modifies Chile's pension system

[G.O.G]

The president of Chile, Michelle Bachelet, presented a project that modifies the current pension system, implementing a new system called Collective Savings to improve workers' pensions.

"The new collective savings increase the pension savings, allowing for better pensions, with a special focus on women and the middle class," Bachelet told a news conference.

This new system of Collective Savings consists of incorporating an employer contribution to the savings of workers, equivalent to 5 percent of their salary.

This 5 per cent will be divided into two: 3 per cent for a personal savings account inheritable from the worker, and the other 2 per cent will be included in a solidarity fund to improve the pensions of other retirees.

Bachelet announced that the project will create a Collective Savings Council, which will be a public and autonomous body that will manage the resources deposited in this fund of 2 percent.

In addition, this fund will also be used to create incentives for women who voluntarily decide to postpone their retirement age.

The president explained that if this project is approved, there will be various benefits for retired workers.
"Pension benefits will be increased by 20 percent from the age of 65, as long as the law is implemented," he said.

He also indicated that a bonus will be granted to women who retire at age 65, seeking to match their pension to that of a man with equal savings.

This reform of the pension system will be sent to Congress divided into three separate bills.

Currently ten million Chileans are affiliated to the private pension system, created during the dictatorship of Augusto Pinochet (1973-1990) and rejected by much of the citizens.

The low remuneration to contributors is criticized, despite the high profitability of the companies and the excessive charges in commissions to the affiliates that make the Pension Fund Administrators (AFP).

Of the total pensions paid by these funds, 90 percent are less than 220 dollars, which is equivalent to 60 percent of the minimum wage established in the South American country.