At a glance
- Law No. 21.735 establishes a mixed pension model with a Social Security Pension Insurance and a gradual employer contribution increase.
- Employer contributions will fund the new Autonomous Pension Protected Fund (FAPP), which supports benefits based on contribution years and gender equity.
- A centralized system will manage unpaid contributions and pension information.
- The Universal Guaranteed Pension will rise to CLP250,000 in stages, multi-funds will be replaced by age-based generational funds, and a new Pension Fund Administrator (AFP) bidding system will enhance competition and reduce fees.
Law No. 21.735 was published on March 26, 2025, introducing a new mixed pension system and a Social Security Pension Insurance within the contributory pillar.
Starting in August 2025, employer pension contributions will gradually increase by 7% of taxable remuneration over 9 to 11 years, reaching a total of 8.5% (including the existing 1.5% for disability and survivor insurance (SIS)).
The new contribution will be distributed as follows:
- 4.5% to individual capitalization accounts;
- 1.5% to a contribution with protected return (It will be allocated to the FAPP to finance the benefit based on years of contributions and the contribution with protected returns. This contribution is transitional, as it begins to decrease 20 years after the law is enacted and ends in year 30); and
- 2.5% to the FAPP.
The FAPP, managed by the Social Security Institute and funded by employer contributions, investment returns, and State support, will finance the Social Security Pension Insurance, which will provide benefits based on contribution years, gender-based compensation for life expectancy, and will provide funding for SIS benefits.
A Unified Contribution Collection System will be established to centralize the recovery of unpaid social security contributions, both in pre-judicial and judicial stages.
The Pension Superintendency will manage a new Pension Information System to help affiliates understand and exercise their pension rights throughout their working life and retirement.
The Universal Guaranteed Pension will increase from CLP224,004 to CLP250,000 in three stages, reaching all beneficiaries aged 65 or over within 30 months.
Mult funds will be replaced by generational funds, which adjust investment strategies based on the contributor’s age to reduce risk as retirement approaches.
Every two years, 10% of new affiliates will be assigned to the AFP offering the lowest commission, which must remain fixed for five years. This mechanism is designed to enhance competition among AFPs and reduce overall management fees.
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