ECONOMY NATIONAL

Bill for Second 10 Percent Withdrawal from Pensions Fund Causes Controversy

SANTIAGO — The pandemic and the social outbreak have had a huge impact on the Chilean economy. In late July, Congress passed a bill that allowed millions of Chileans to withdraw 10 percent of their pension funds to face the financial crisis. Amid heated debate, a new bill to allow for yet another 10 percent withdrawal is currently being discussed in Congress.

Back in August, congresswoman Pamela Jiles, from the Humanist Party, was among the politicians who introduced the motion to allow for a second 10 percent withdrawal. On Oct. 27, the bill was voted on by the Constitutional Commission of the lower house.

With 11 votes in favor and only 1 against — from right-wing representative Jorge Alessandri — the committee passed the piece of legislation, and it will now have to be discussed by the lower house.

Content of the Bill

The project, backed by the opposition, is similar to the first one that already allowed over 10 million people to withdraw 10 percent of their savings. However, it requires a modification to the current Constitution.

The bill would add the following paragraph to the current Magna Carta: “To mitigate the social effects arising from the State of National Catastrophe declared in response to covid-19, the users of the private pensions system governed by the 1980 Decree-Law No. 3,500 will be allowed to voluntarily and exceptionally make a second withdrawal of up to 10 percent of the savings accrued in their retirement pools.”

As it involves the Constitution, Cristián Monckeberg, Secretary-General of the Presidency, said at the end of the session that the government would subject the bill to the Constitutional Court.

Read more:

Chileans Now Allowed to Withdraw 10 Percent of Pensions

Government’s Position

The Minister of Labor, María José Zaldívar, along with the Minister of Finance, Ignacio Briones, held a two-hour meeting with President Piñera to discuss the recent passing of the bill.

According to Diario Financiero, Piñera asked the ministers to double their efforts to reach an agreement that would allow for pension reforms, instead of the second 10 percent withdrawal. Zaldívar said that “if we want to improve retirement benefits, we must reform the system, but using the resources we have for tomorrow’s pensions is not the way.”

The government opposed turning to pension funds for economic relief the first time and now its position is no different. Among the arguments given by the authorities is the fact that millions of people would have no funds for when they reach retirement age.

The study center Ciedess made an analysis of the impact a second withdrawal would have on those affiliated with AFP pension funds. It concluded that nearly four million people would be left without money. That is 35 percent of all users.

The research agency also found that the hardest-hit group would be women because of the 4 million people whose accounts would be empty, 58 percent (2.3 million) are women.

In addition, the report says another “one million people would not be able to access the so-called solidarity pension because they are not part of the 60 percent most vulnerable segment.”

Divisions Among Government Supporters

The second withdrawal bill has not only caused divisions between the government and the opposition, but within the Piñera administration supporters as well.

The head of the far-right Democratic Independent Union party (UDI), María José Hoffmann, told Cooperativa Radio that the government needs to present an alternative to prevent cash-starved families from having to turn to their pensions funds. “We don’t like this project in the UDI, but we believe that the pressure must be on the administration. The state should not allow for its role to be substituted.”

During the session, Eduardo Durán, a right-wing representative who voted in favor, said that “it is unfortunate that workers have to make use of their retirement savings, but it is necessary because the state has not supported them in the crisis resulting from the pandemic.”

Right-wing senator Manuel José Ossandon has also criticized the government. He has repeatedly spoken of the government’s need for an alternative. He recently told Cooperativa Radio that despite the bill being a bad idea, he will still vote in favor if the government does not come up with a better solution.

Also read:

Unemployment Rises to Highest Figure In a Decade

Edited by Claudio Moraga

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