Changes to pension reform: government evaluates allowing retirement with return of funds for first home

The changes that the government is preparing for the pension reform continue to advance at full speed. On the one hand, with Dipres modeling the new proposals. On the other hand, with meetings of ministers and President Sebastián Piñera; in addition to the conversations of the Executive with the parliamentarians of Chile Vamos. Against this backdrop, a formal announcement is expected in the coming days.

The proposal the government is working on now is the one presented by Chile Vamos with a new distribution of an additional 6% contribution: 2% to individual accounts, another 2% for longevity insurance and the remaining 2% for a common fund solidary. This was confirmed this Wednesday by the Labor Ministers, María José Zaldívar; and the Minister Secretary General of the Presidency, Cristián Monckeberg.

Government sources comment that this proposal makes sense to them, and they consider that it could generate consensus, since it likes the ruling party and could convince the opposition. The above, because although the Executive had said that it would not move from the 3% of additional contribution to individual accounts, and now the proposal is that it only go 2%; The truth is that by allocating 2% to insurance, they estimate that the average benefit that each person could extract from it would be one point.

Therefore, it would not be that different from the proposal they had made. Meanwhile, the opposition could assimilate this as 4% to solidarity, and 2% to individual accounts. In addition, there is the idea that the mortality tables end, a question that had also been requested by a part of the opposition, so they estimate that with this they could win votes from the DC. Preliminarily, it would also benefit women more than men, an issue that has also been requested.

Of course, knowledgeable sources comment that this in practice does not eliminate the root mortality tables, because to calculate the insurance the tables could also be needed, but in any case, they would lose relevance in the calculation of the pension and, what is more importantly, it would raise profits considerably. Although Dipres continues to model the proposal to see how much the increase would be, some estimate it to be close to 20%.

However, one of the main arguments that the opposition has had so far to defend its proposal for notional accounts is that it provides better benefits than the government’s.

However, the Executive estimates that with this new idea, this argument ends, since it would deliver better benefits, considering that the proposal of the notional accounts would be a riskier system, since it has a debt component, while the idea Chile Vamos would be more sustainable, they warn.

The truth is that the government is clear that in order to reach an agreement, they must start by making a proposal that convinces their sector, but that also has ideas that the opposition likes. This is why, beyond the longevity insurance that the government is modeling, there are also other ideas that are on the table that are being discussed with the ruling party.

One of them is to allow a withdrawal of the funds, with the return of the money, but under some conditions. In the first place, it is being evaluated that it can only be used for some specific purposes, such as investment in a first home, but it could also be under other circumstances. Second, this would occur only with the commitment to return the funds, or to be able to postpone the retirement age, for example by a couple of years.

At the same time, the withdrawal of funds for terminally ill patients is also being evaluated for incorporation into the reform.

On the issues that concern the industry, the project contemplates that the AFPs only manage the current 10%, without receiving “not one peso more”, as requested by the opposition. But the government formally also had proposed two other alternatives to the ruling party parliamentarians, and asked them to comment on them: that the AFPs only dedicate themselves to making the funds rent, separating the administration of the accounts; and tender the stock of affiliates.

On this point, there is still no defined position at the level of Chile Vamos, but in any case, the ruling parliamentarians consider that important changes are already being made to the industry. This, considering the project that was approved in January in the Chamber of Deputies, where, among other things, entry barriers are lowered so that there can be more competition, and the return of commissions in case of negative profitability of the AFPs.

Minister Monckeberg this Wednesday on Radio Universo also commented: “We want to go biting, in the sense of improving the pension system. Enter to advance in a universal basic pension, that in any case, that is approaching what is the minimum wage. We have indicated that we also want to modify how the AFPs are organized and separate the tasks and actions that they carry out around one collection, and obtain profitability from their funds versus who pays and distributes the resources to the people who are retiring ”.

On the separation of the industry, the senator and president of the UDI, Jacqueline van Rysselberghe, affirmed: “It seems to me that it is possible to talk, as long as it generates benefits.” However, he pointed out that “for us it is important that individual capitalization be maintained and that there be investment of the funds (…) That should be maintained because that helps to maintain better pensions, the rest can be discussed.”

In the midst of the news in which the government is working, and of which the opposition assures that it found out from the press, the parliamentarians are waiting to see the official proposal of the Executive.

In the meantime, they have also made statements. Senator Carolina Goic (DC), a member of the Labor Commission, pointed out that “what we have known, more than a serious proposal, seems more like a pension frankenstein, which sticks different proposals. So the call is for a minimum of seriousness. The project has been waiting for more than nine months for indications that have not come from the government. With retirees in our country you do not play. What we ask the government is to get serious and make a proposal that allows us to increase the pensions of our older adults now, and permanently ”.

Meanwhile, his DC counterpart, Ximena Rincón, said that eliminating the mortality tables “I have proposed it for more than a year.” Of course, he commented that before “I must know the government’s proposal.”

On the other hand, the president of the Labor Commission, Senator Juan Pablo Letelier (PS), commented that “we have learned from the newspaper that the government, first, evicted its project that comes from the Chamber of Deputies, and that they are making a new proposal that we do not know in the least if it is a solid, sustainable proposal, or pure improvisation, at times it seems like an Easter tree more than a serious pension proposal, that is worrying. We have been waiting for months in the Senate Labor Committee for the government to present indications and rule on our proposal, which provides better solutions than theirs ”.

Asked whether they will evaluate a government proposal in case it provides better pensions, Letelier explains that it is a matter of mathematics: 6% to solidarity cannot deliver better pensions than 2% for that purpose. And don’t you consider 2% insurance in the solidarity calculation? “Longevity insurance is the most regressive thing there is, people with high incomes, who eat better, who live with fewer difficulties, live longer than people who eat worse,” he said.

Anyway, Letelier said they are willing to talk everything. “We are going to support what allows better pensions for the great majority in a stable and sustainable way.”

The idea of ​​longevity insurance is not to have to calculate the pension of each person according to the mortality tables, which currently establish the life expectancy of women at 91 years on average, and in the case of men at 86 years on average, and it has been criticized that they reach 110 years.

Now an age lower than that would be established to calculate the pension of each member. Therefore, the amount of time that the funds that each person accumulated must cover is less, so the pensions would rise immediately. In the event that an affiliate lives beyond the age that was defined to calculate his pension, this longevity insurance that is intended to be created would begin to run, and which would grant the affiliate the same pension that he previously received with his own resources.