SANTIAGO – The Chilean government is overhauling the private retirement system implemented in the country by late Gen. Augusto Pinochet’s regime in 1981, President Michelle Bachelet said.
Bachelet announced the changes in an address Wednesday night, responding to long-running complaints about the meager payouts from the private retirement system.
The government will impose an additional contribution of 5 percent of pay that will be used to create “a new social savings system.”
“A charge will be imposed on employers over a period of six years to guarantee a better transition,” Bachelet said in a nationwide address carried on radio and television.
An independent public agency will be created to manage the new pension system, the president said.
The 5 percent contribution will be split into a 3 percent contribution to individual accounts, which can be pass on to heirs and belong to account holders, and a 2 percent contribution to the public pension system, Bachelet said.
Chile’s retirement system has long been touted as a model by advocates of privatizing public pension systems, but participants complain that the monthly payouts are insufficient to cover living expenses.
Currently, 90.7 percent of participants in Chile’s private retirement system receive less than 154,000 pesos ($233) a month, or about half the minimum wage.