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Elaine Jenkins
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The so-called "social security reform" of the Chilean government in the 1970s and 1980s was implemented with the introduction of a public pension system, the Chilean Social Security System .
Even before the recent crisis, Chileans "dissatisfaction with the privatized pension system spawned one of Chile's strongest social movements, which played a major role in the protests of 2016 and 2019. In this context, five left-wing senators have introduced a constitutional amendment that would nationalize the pension system and create a system in which the elderly and poor can enjoy a decent retirement and workers can have a stable retirement account. Because Pinochet's authoritarian constitution is very difficult to amend, and the beleaguered Chilean state would have to pay into individual pension accounts, it is highly unlikely that it will enter into force before 2020.
In 1982, at the height of the Pinochet dictatorship, the pension system for pensioners was introduced and it began to take hold. In 1982, people received a pension of 50,000 pesos a month, or about $2,200 a year, until the schemes were sold to people who could retire on 70% of their salary. The average pension paid to a man in 2018 was 150,000 pesos , according to the National Institute of Social Security .
In fact, 80% of pensioners receive less than the minimum wage per month, and a government-funded minimum pension of 50,000 pesos is being introduced for those who cannot save for retirement.
This increase in contributions will allow us to build a basis for collective savings through solidarity, "Bachelet said. The AFP is run by the state, so contributions are required and fund managers and the Commission are kept on an equal footing. This creates competition and promotes competition in the pension system, according to the state news agency AFP, as well as in other sectors of the economy.
If Chile's pension system implements these reforms and addresses its growing aging population, external parties will be able to consider Chile one of the most progressive pension systems in Latin America, if not the world, the OECD said.
Thousands of Chileans gathered in the capital Santiago on Saturday to protest the country's current pension system and demand that Chile "deserves an age of dignity. The march was organized by the National Association of Pension Fund Administrators , whose name suggests its support for a privatized model based on a pension managed by its own employees rather than a state pension.
In 1981, under Augusto Pinochet's dictatorship, Chile introduced a pension system that required workers to allocate 10% of their income to a private pension fund manager known by his official name, the National Association of Pension Fund Administrators . Those who did not contribute, and very few who did, received a basic pension of $146 a month from the state. On Saturday, thousands of people from all over Chile and other countries joined together to demand that it be replaced by a model of solidarity, financed by workers, employers and the state.
The minimum was later changed to meet public demand, but it was not introduced until 2008, under Michelle Bachelet's government.
Under the current system, workers pay 10% of their salary into an account run by a private company called a Pension Fund Manager . While employers and the government do not contribute to workers "accounts, companies invest the money. After Chile's failed pension system failed in 2009 and 2010, Chilean President Michelle Bachelet began exploring reform options.
But many people in the Andean country are unable to pay enough regular contributions to end up with adequate payouts, while Chileans who work informal jobs and unemployed women who have given up work to raise children often do not get enough - they have switched jobs. Maria Luz Navarrete says she worked as a public servant for three decades and had to work as a janitor to make ends meet, with 70 part-time jobs. This means that there is no access to the local pension fund, which invests billions of dollars in Chile and abroad.
The new system faces serious challenges as workers retire, leaving a small accumulation of accounts. Defenders of the system, however, say that the problem is not only a result of the country's aging population, but also of a lack of access to pension funds.
The traditional system requires that at least two thirds of the employed and self-employed retire on a voluntary basis. Almost the entire workforce is involved in their careers by enrolling in private pension accounts managed by private investment firms. Since 1982, workers have had to join a private pension account. When private pension accounts were introduced, workers who were covered by the traditional pension scheme had the option of joining the new scheme, but only about a third of them.