​Solutions to improve pensions: more savings and a more active State on social security

  "How to improve pensions, short and long term changes that Chile needs" was the theme of the seminar held today with former Finance Minister, Andrés Velasco, former Economy Minister Alejandro Ferreiro, and Executive Director at Comunidad Mujer, Alejandra Sepúlveda as the speakers. The experts agreed that increasing pensions requires a higher quality labor market and more pension savings, in addition to overcoming the imbalance in women's wage and access to labor market. ​They also criticized the decision to defer the mandatory contribution for the self-employed – representing 25% of the employed – noting that only 8% out of this group saves for retirement, which would imply a potential problem when they retire. SANTIAGO, 13 October.- Today the State spends 3.5 points of the GDP on pensions. One point destined to 1.3 million people receiving State pensions; another point to 200,000 retirees from the Armed Forces and the rest to pensioners retired under the old PAYG system. As Chilean population ages, in the medium term, this figure is expected to grow by an additional 1.5 points, representing 5 points of the GDP. The above was pointed out by former Minister of Finance, Andrés Velasco and former Economy Minister Alejandro Ferreiro. Also, Ferreiro said that the Chilean pension system "is disclosing" the financial tightness of the country in this moment, given that in Europe, with pension systems providing more benefits for individuals, pension liabilities exceed 300% of the GDP. Specialists gave such estimates during the seminar "How to improve pensions, short and long term changes that Chile needs" organized by SURA and the Interamerican Association of Economic and Financial Journalists, Chilean Chapter (AIPEF), at which the executive director of Comunidad Mujer, Alejandra Sepúlveda and AFP Capital General Manager Eduardo Vildósola also participated. During the debate, Alejandra Sepúlveda, revealed the inequality condition of women's participation in the labor market, having fewer years of contributions, higher survival estimates, fewer years worked for pay and lower wages than men. All these factors result in lower pensions than men's, and being today lower than CL$200,000 on average. Additionally, she said that women work only 60% of their active lives as they should devote the rest to take care of children and the elderly, which implies providing a covert and free subsidy to the national economy. The experts agreed with many of the measures proposed by the Bravo Commission on increasing pensions, indicating that the solution requires a joint effort by the State and society, both by employers and individuals. The discussion should also focus on how to finance the necessary increased resources which the Treasury would spend, they said. Eduardo Vildósola, AFP Capital General Manager, concurred to increase the contribution rate under the employer proposed by President Bachelet, but he said that a higher percentage of this contribution should be saved in individual accounts. This way is more efficient and focused on strengthening the Solidarity Pillar, he said. All panelists agreed on the urgency of implementing the obligation to pay contributions for the self-employed, being close to 25% of the employed, noting that only 8% out of this group saves for retirement, which would imply a potential problem when they retire.