Chilean President Pitches Reform in Wake of Deadly Pension Protests

Chilean President Sebastian Pinera is pitching a new plan to appeal to pension protesters’ demands throughout the country.

Residents have protested for months that their pensions defy normal living standards, and generally come up well below the minimum wage despite their lifelong contributions to the pensions. Public demonstrations detesting the country’s pension have left scores of citizens dead, injured and arrested.

To help alleviate the situation, President Pinera proposed a 3% increase in contributions to the country’s pension system and Pension Fund Administrations (AFPs). He also urged a 3% boost towards pools of capital to improve pensions both now and in the future, called the Collective and Solidarity Fund.

“Within 6% we have opted for a [solution where] half goes to the individual account, to the pension savings of each worker to finance their own pension, the other half to a Collective and Solidarity fund to improve the pensions of the sectors more vulnerable,” the president said in announcing the proposal.

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The aggregate 6% in new contributions would be sourced from the employers. If enacted, President Pinera promises pensioners now and in the future, would be sustained above an impoverished quality of life. Any pensioner who has contributed at least 30 years of payments will not receive benefits payments lower than the country’s minimum wage.

The president’s proposals also include several changes to the current AFP system. Under the proposal, fund managers would be mandated to refund part of the commissions charged in case of negative returns to the funds. They also will be prohibited from charging commissions for investments in national mutual funds. It also opens the door to new players such as non-profit entities, and facilities greater participation by affiliates.

According to President Pinera, these new stipulations are expected to increase pensions by approximately 30%.

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Tags: Chile, Contributions, Pension Plans, Pension Reform, Protests, Regime Change, Retirement System

The Ohio Public Employees’ Retirement System (OPERS) voted last week to cut health care benefits provided to the pension’s current and future retirees beginning in 2022 to try to weaken the imminent threat of insolvency.

If the changes had not been enacted, the pension would run out of money in approximately 11 years, executive director Karen Carraher said during a board meeting, where the measure was passed by a 9-2 vote.

“There is no available funding for health care,” a report from the board said. “All of the employer contribution[s] must be allocated to pension funding until that funding improves. Based on current projections, no funding will be available for health care for 15 or more years.”

Beneficiaries will receive a wide variety of quantitative cuts, depending on their age of retirement, the year in which they retired, and the number of years working in the state. “Surveys indicate members willing to accept changes/reductions in health care in the interest of preserving it,” the board’s report said.

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Nearly everyone in OPERS likely will be affected by these changes. The board’s vote constituted the elimination of the pension’s healthcare group plan, and replaced it with a stipend that will help supplement for some members the cost of a new healthcare plan on the marketplace.

“Pre-Medicare group plan is unsustainable for OPERS and members as risk core and costs continue to increase,” the report said. The board “needs to reduce the cost of health care to preserve current health care trust fund until such time funding can resume.”

“Our objective is to continue offering health care. To accomplish this, we need to implement changes that will extend the solvency of the health care trust fund,” the board’s report said.

The OPERS board of trustees is considering an increase in the state retirement age from 55 to 62. The board also voted last September to freeze cost-of-living-adjustments (COLA) for retirees in 2022 and 2023.