Chilean Parliament advances in the discussion of controversial fourth retirement of pension funds

The controversial bill that seeks to allow a fourth withdrawal of 10% of the Pension funds on Chile advanced this Tuesday in Parliament involved in controversies and despite the frontal rejections of the Government.

The initiative, presented by opposition parliamentarians, received the green light in the Senate Constitution Committee, with 3 votes in favor and 2 against, and is now awaiting a vote in the plenary session of the chamber – something that could take place in the next few weeks- and the discussion of its articles.

If approved, all taxpayers could withdraw, for the fourth time since the start of the pandemic, a tenth of their pensions managed by private administrators to face the economic hardships generated by the COVID-19.

“The fourth withdrawal is necessary to give guarantees to Chileans in this scenario of economic uncertainty. It will make it possible to level the playing field and improve the starting conditions for many families, ”said the president of the commission, the opposition Pedro Araya.

Pension withdrawals are one of the most controversial issues in the country: defenders argue that the more than US $ 40,000 million announced by the government for social assistance is not enough and that people need more liquidity.

Meanwhile, detractors point out that it is a way of mortgaging the future of taxpayers, which violates constitutional norms and is not appropriate since the pandemic conditions are not as serious as those of 2020.

They also maintain that a new withdrawal will worsen current inflation, which according to the Central Bank accumulates an increase of 4.4% so far this year, something unprecedented since 2008.

In mid-August, the president of the Central Bank anticipated that this policy could have “extremely serious” effects, considering that the amount of money in circulation could “overheat the economy” of the country.

Break in government

“This initiative hurts much more than it helps. The aid must come from the State ”, expressed Rodrigo Galilea, official senator.

“We do not continue to advance in more withdrawals, let’s modify the pension system with mandatory contributions. That must be the solution, “added Luz Ebensperger, another right-wing MP.

The project has also generated a crisis within the ruling party, and while the Government has made a call to reject it, several deputies voted in favor in the Lower House.

If it goes ahead, this fourth withdrawal would be added to the one approved last April and those of July and December of last year, which have meant a disbursement of almost US $ 50,000 million for the Pension Fund Administrators (AFP).

While these management companies obtain millionaire benefits, half of Chilean taxpayers receive less than 215,000 pesos (US $ 280) per month of pension, according to data from the Fundación Sol, being that the poverty line stands at 170,000 pesos

Replicated since the 1990s in much of Latin America and a pioneer in individual capitalization, this model is strongly questioned today by the pyrrhic pensions it grants and there are more and more voices calling for a transition to a more supportive model.