CHILEAN PENSION REFORM 2025: WHAT YOU NEED TO KNOW
A Historic Change for Chile's Pension System
March 26, 2025 marked an important milestone for Chileans. On that day, the long-awaited Pension Reform was published in the Official Gazette as Law No. 21.735, culminating years of debate on how to improve the country's pension system.
This reform maintains the individual capitalization system that has characterized the Chilean model since 1981, but introduces significant solidarity components aimed at improving current and future pensions, with special emphasis on historically disadvantaged groups such as women and people with gaps in their contribution history.
Main Changes You Should Know About
Increase in the Universal Guaranteed Pension (“PGU =Pensión Garantizada Universal”)
The PGU will increase to CL$ 250,000 pesos, implemented gradually according to age:
· September 2025: People over 82 years old
· September 2026: People over 75 years old
· September 2027: People over 65 years old
This increase represents relief for retired people who currently receive insufficient pensions.
New Additional Contribution of 8.5%
One of the most important measures is the new 8.5% contribution paid entirely by the employer, which will be distributed as follows:
· 4.5% will go directly to your savings in your individual account (gradually increased from August 2025 until 2033).
· 1.5% will finance a Social Insurance (which will function as a loan to the State and will be returned when you retire, in installments over 20 years).
· 2.5% will cover the Disability and Survivor Insurance (SIS) and compensation for gender differences.
"This additional contribution could increase future pensions by up to 30% for those who begin working under this new scheme" - Ministry of Finance
Special Benefits for current retired people
· Benefit for Years of Contribution: Starting by January 2026, payments will receive 0.1 UF for each year contributed with a maximum of 2.5 UF monthly. Women must have contributed for a minimum of 10 years and men for at least 20 years.
· Compensation for Women: To reduce the gender gap and address the difference in life expectancy, female pensioners over 65 years old will receive an additional 0.25 UF monthly paid in January 2026.
Generational Funds
Starting April 2027, the current multi-funds (A,B,C,D and E) will transform into generational funds as a new way to invest your savings. These funds automatically adjust automatically according to age, reducing risk as you approach retirement. Affiliates cannot change their generational fund for mandatory savings but allow changes in voluntary savings. This change aims to protect your savings from market fluctuations when you're close to retirement.
Member Bidding System
Starting June 2028, every two years 10% of non-retired affiliates will be randomly selected to transfer to the AFP (pension fund administrator) with lowest commission. You have the right to reject the change within 30 days after being notified. Each affiliate can only be selected for this change once in 20 years. This implementation aims to generate greater competition among AFPs and reduce commission throughout the system.
How Does This Reform Affect You?
If you are an active employee with working contract: You'll see a gradual increase in your total contribution (paid by your employer). Your funds will automatically transition to the generational fund system in 2027. You might be part of the member bidding process starting in 2028.
If You're Retired or Close to Retirement: You could receive the PGU increase according to your age. If you meet the requirements, you'll receive the benefit for years of contribution. Women over 65 will receive additional compensation.
If You're a Woman: You'll benefit from the life expectancy compensation. You need fewer years of contribution (10) to access the benefit for years contributed.
Conclusion
The 2025 Pension Reform represents one of the most significant changes to the Chilean pension system in decades. While it maintains the individual capitalization structure, it incorporates important solidarity elements that seek to improve current pensions and reduce historical gaps.
To learn more details about how this reform affects you personally, we recommend consulting directly with your AFP.
This blog post is for informational purposes and is based on the official information available about Law No. 21.735. For more specific information about your pension situation, consult the official channels of the pension authorities or your AFP.
Last updated: April 11, 2025