Piñera presents alternative bill for pandemic pension fund withdrawals

RIO DE JANEIRO, BRAZIL – Chilean President Sebastián Piñera on Sunday presented an alternative bill to allow the country’s citizens to withdraw a third 10% of their savings in private pension funds, in an attempt to stop a similar measure passed in Congress that seeks to help the depleted middle class during the pandemic.

“Tomorrow we will forward to Congress, and with the utmost urgency, a bill for the withdrawal and recovery of pension savings, which allows Chileans to withdraw 10% of their savings and which solves the problems of the bill recently approved by Congress”, announced the conservative president.

Unlike the Congressional proposal, the new bill includes the payment of taxes “for contributors belonging to the 10% with the highest income in the country”, who have a taxable income of over 1.8 million pesos (US$2,500).

The new text also includes a bonus of 200,000 pesos (US$280) for the 3 million people who were left without pensions with the two previous fund withdrawals, in July and December, as well as a restitution system to strengthen pensions with a 1% increase in contributions by the State and employers.

As such, Piñera explained, “the total contribution to workers’ pension savings will increase from 10% to 12% and will improve future pensions by 20% over time.”

“I have the obligation to act with sensitivity to the needs of my compatriots, but also with responsibility,” added the Chilean president, who was heavily criticized for rejecting the Congressional proposal.”

INTENSE NEGOTIATIONS

Piñera’s announcement comes after a weekend of intense negotiations with the parties that make up the ruling coalition, and after the petition lodged by the Government before the Constitutional Court to block the Congressional bill, which was passed by an overwhelming majority and even counted votes from the ruling party.

“The reform passed by Congress does not respect our Constitution and our rule of law,” said the President, who warned that 5 million Chileans would be left without funds if the withdrawal of the third 10% of their savings with parliamentary backing were to prosper.

Should the Constitutional Court reject the Government’s appeal, the validity of the withdrawal would depend on Piñera’s enactment, while if it accepts the Government’s petition, waiting for the highest Chilean court to issue a final ruling would be required.

The opposition has not yet taken a position on the announcement by Piñera, who resorts to this political strategy for the second time, after having challenged the second withdrawal of pension funds in December and presenting in parallel a new text that also included the payment of taxes by the wealthiest classes.

To date, the 11 million members of the Chilean private pension system have withdrawn over US$36 billion.

The opposition and part of the ruling party claim that these savings withdrawals are necessary because the US$18 billion announced by the government for social assistance are insufficient and “are not reaching the population.”

Replicated in the 1990s in most of Latin America and a pioneer in individual capitalization, the Chilean pension model is nowadays strongly questioned for the meager pensions it provides, compared to the multi-million profits of private companies that manage the funds, while increasingly more voices call for a move towards a more solidarity-based model.

Source: El Diario