Some Basic Principles to be considered in the Design of the New Chilean Pension System

Document presented by Centro de Estudios Nacionales de Desarrollo Alternativo, CENDA to the "Consejo Asesor para la Reforma Previsional," nominated by President Michelle Bachelet

Santiago, April 4, 2006

The undergoing reform of the Chilean pension system, promoted by the government of President Michelle Bachelet, faces the challenge of building a modern and lasting pension system, which may draw wide consensus among citizens. A first, minimum, condition for this, is that it restores to every Chilean, retirement entitlements at least equivalent to those that the traditional public system still ensures to three out of every four elders. Then, it should gradually improve entitlements for all. These benefits, modest as they may seem, are significantly better than the ones received by those that are already obliged to retire under the AFP system. Women are most damaged, and they number two thirds of the elderly. This is an unacceptable discrimination between two groups of Chileans. The current reform faces the imperative of repairing such injustice.