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- The Autonomous Pension Protection Fund (“Fondo Autónomo de Protección Previsional” or “FAPP” in Spanish) is created, which is backed by the government but will be managed by private-sector entities.
- Starting in May 2025, Unemployment Insurance pension coverage will also be extended and will cover the pension contributions for those unemployed who claim the unemployment insurance charged to their individual account. Prior to the reform, this coverage was only given to those who used the Unemployment Insurance charged to the solidary funds.
- A new contribution of 7% of an individual’s taxable income is to be paid by the employer. This will be added to the 1.5% contributed by employers to the Disability and Survival Insurance (currently at 1.38%), so that employers will contribute a total of 8.5% (phased in over 9 years) for the benefit of the employee.
- This total of 8.5% will be distributed as follows:
i. 4.5% for individual capitalization – managed by the existing Pension Fund Administrators (AFPs) – and with the objective of strengthening future pensions.
ii. 4% will be managed by the FAPP and will have the following composition:
a. 2.5% will cover benefits under Disability and Survival Insurance, and Women’s Compensation for longer life expectancy.
One of the reform measures provides for women and men both retiring upon reaching the age of 65, entitled to the same balance, and the same family group obtaining the same pension. Before, the retirement age for women was 60.
b. 1.5% will finance a benefit based on years of contributions and will improve current pensions. This will be of a temporary nature.
This benefit will be available to women who have made at least 10 years of contributions, a threshold that will be maintained during the first decade of the benefit. After that, this access requirement will increase to 15 years of contributions. In the case of men, those with a minimum of 20 years of contributions will benefit.
This 7% rise in employer contributions will begin gradually, starting with 1% of taxable income, starting in August 2025.
- Starting in September 2025, the Guaranteed Universal Pension (“PGU” in Spanish) will reach a maximum amount of CLP 250,000 for the first group of beneficiaries, who will be pensioners aged 82 or older.
- In August 2027, the first public tender of pensioners’ accounts will be implemented to encourage competition among the AFPs. Every two years, 10% of pensioners’ accounts will be randomly reassigned to the AFP that charges the lowest commission, which could help reduce costs for employees.
- The reform implementation process is the responsibility of the ministries of Labor and Social Security and Finance.
