Note On Pension Withdrawals

*Rather than reforming the pension system, Congress chose a short-sighted solution. Many have considered the withdrawal authorisations as reckless and representing an attack on the very logic of Chile's system of social security and economic development based on long-term savings as a strategy for investment and growth.

*This decision has now done irreparable damage. According to Fernando Larraín, general manager of the AFP Association, almost a third of Chile's 11 million pensioners may have no retirement savings left after the second payout. If forced to rely on the solidarity pension, retirees can only hope to receive around $240 a month.

*When Chileans protested in 2019, signs and slogans displayed not only a pronounced worry over lags in health, education and employment, but also over an inadequate pension system.

*As a result of the withdrawals, value estimates for men and women are losses of 17.4% and 21.2%, respectively. The two approved withdrawals are estimated to remove $30 billion from the system. For reference, social spending amounts to around $50 billion per year.

*Additionally, President Piñera's administration remains stalled, blocked by threats from the opposition and an increasingly ingrained populism in Congress.

**The ongoing constitutional reform process may give Chile a second chance to re-establish a serious dialogue to improve the system.The first signals will come from the result of the April 11 election of the 155 members of the constituent assembly.