This study (only available in Spanish language) examines the main issues or challenges of the Chilean pension system, which the government’s latest proposal does not address, while the remedy to these problems is the country’s economic growth.

• Contributory Pillar Challenge: Chileans contribute few years to finance a long period of retirement: the average woman saves 10% of her salary for 19 years to finance a 32-year retirement; the average man saves 10% of his salary for 26 years to finance a 23-year retirement.
• How do we rate compared to the OECD developed countries? Very badly: In Chile, only 36% of the working-age population is formally employed and pays contributions. This percentage is 47% in the OECD.
• How do you increase formal employment coverage? The literature reveals that it goes hand in hand with the growth of the economy as companies and formal ventures expand in the market, generating more employment.
• In Chile there is a close relationship between economic growth and increased formality: the coverage of formality grew at the pace of GDP pc from 2004 to 2023, with accelerated growth between 2004 and 2013, followed by a slowdown after 2013.
• How long would it take us to achieve OECD formality coverage? If the annual growth rate of the GDP pc between 2004 and 2013 is recovered, we would achieve the current OECD formality coverage in 11 years. If we maintain the GDP pc growth of the last 10 years (2014-2023), we would achieve the OECD’s current formal employment coverage in 39 years.
• Challenge in the Solidarity Pillar: PGU fiscal spending is high and eases with the growth of the economy:
• If the economy grows at the same rate as the population over 65, PGU spending would remain stable at 2.3% of GDP (10% of tax revenue);
• If the economy maintains the low growth rate between 2014 and 2023, PGU expenditure would increase to 2.5% of GDP (12% of the fiscal budget);
• If the economy recovers the growth rate between 2004 and 2013, PGU expenditure would drop to 1.3% of GDP (6% of the fiscal budget)
• How can we revive economic growth? Some measures have been proposed: reduce the rigidity of the labor system (lowering severance pay), encourage investment (by simplifying and reducing permit processing times), increase the country’s savings and modernize the State apparatus.