9 May, 2025
The reform to Chile’s pension system was approved by Congress on January 29, 2025, following a broad political agreement that involved various political sectors and took over two years to process. It was promulgated into law in March 2025.
The Chilean pension system, based on individual savings, began operating in 1981, replacing the old pay-as-you-go system which functioned through various social security institutions (“Cajas de prevision”) and presented a series of inequities.
Demographic pressures have made a reform necessary to bring pension benefits closer to people’s expectations. However, after the approval of the solidarity pension system in 2008, the only reform that succeeded was the establishment of the Universal Guaranteed Pension (PGU) in 2022, which, while it brought a notable improvement in pension amounts, did not include modifications to the contributory pillar or changes in system parameters. Therefore, the 2025 pension reform is the first, since the creation of the individual savings system, to include parametric changes. Among its main measures are the increase in the employer-paid contribution rate, the introduction of generational funds, the increase of the PGU, and the bidding of the member stock.
This document summarizes the characteristics of the Chilean pension system and analyzes the main changes introduced by the new law, evaluating their possible effects and the pending challenges, in order to move towards pensions that are sufficient and sustainable over time.
