The debate over the low pensions granted by the AFPs is not only a queue in Peru. This week, the Chilean Chamber of Deputies gave the green light to a bill that seeks to finance the new Universal Guaranteed Pension (PGU), proposed last December by President Sebastián Piñera, through a wealth tax, according to the Bloomberg portal.
The Executive’s proposal establishes a guaranteed monthly pension of 185,000 pesos (US $ 222), which will benefit Chileans 65 years and older who do not belong to the richest 10% of the population.
The cost will reach 0.95% of GDP between 2028 and 2034 before averaging 0.92% in the 2040s, according to the Finance Ministry.
To finance the PGU, the original plan called for eliminating or reducing tax exemptions. However, opposition lawmakers added a wealth tax of 1.5% for people with capital between US $ 5 and US $ 22 million, and 2.5% for those above that range. The letter was forwarded to the Senate.
Lawmakers and economists have said the government’s plan to cover the costs of better pensions will fall short. Still, the administration said it will challenge the bill before the Constitutional Court, arguing that tax matters are the prerogative of the head of state.
The PGU will be financed by the State, administered by the Social Security Institute (IPS) and will reach the elderly directly, without going through the AFPs, replacing the Solidarity Pillar. It is estimated that it will benefit 2.3 million people, 500,000 more than those benefited by the current solidarity system.
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