Protestors say the market-based scheme, which was introduced in the 1980s, does not ensure a decent income for many Chileans when they reach old age.
Under the system, the nation’s $160bn in pension assets are managed by six private funds, known as AFPs. Workers are required to save at least 10% of their gross income annually, and the scheme aims to pay out at least 70% of a worker’s pre-retirement income once they retire.
A group called No More AFPs, which organised the march, describes the funds on its website as “undercover banks” for the richest businessmen in Chile and from abroad.
No More AFPs argues that Chileans only see around 38% of the revenues obtained during their working lives on average, which drops to 28% for women. Meanwhile wealthy Chilean fund managers use the schemes to “concentrate more capital into even fewer hands”.
OECD modelling predicted last year that workers who retire in 2059 in Chile will see a net replacement rate (the percentage of pre-retirement income paid out after retirement while taking into account taxes and social security contributions) of between 37.9% and 48.7%, with lower earners getting the most.
The system has been backed by pro-market politicians and economists in Chile and beyond. But No More AFPs said as many as 350,000 people turned out yesterday in the capital Santiago to protest the schemes. Local police put the number at 80,000.
Earlier this month, the country’s leftwing president, Michelle Bachelet, announced a number of reform proposals to improve the schemes. Any changes must be passed by Chile’s congress.
These included: hiking the contribution rate to 15% within 10 years, which would be paid for exclusively by employers; gradually making contributions from self-employed workers mandatory; giving workers more say on investment decisions made by the funds; forcing funds to pay back contributors after a period of losses; and eliminating hidden fees charged by the funds.
Because the state is one of the country’s biggest employers, the increase in contribution rate would cost the government around $1.5bn.
Public pension spending in Chile was equal to around 3.2% of GDP last year, compared to an OECD average of 7.9%.
But protestors want Bachelet to scrap the current system altogether. Luis Mesina, a spokesman for No More AFPs, told Reuters: “We expect the president and her government to open a dialogue and listen to the citizens of the country, and not just the owners of the AFPs.”
No More AFPs has called for a nationwide strike on 4 November to further protest the scheme.
