10.16.1.30 Social Security System in Chile
Chile's social security system
The Chilean social security system is contributions based. The Chilean Congress established a mandatory pension in 1924.
In May 1981 a new privatised system of individual accounts (Sistema de Capitalización Individual) was created. The old system (Social Insurance Schemes) was closed to new entrants and was to be gradually phased out. Special systems for key groups such as the armed forces and national police were retained.
Participation in the Sistema de Capitalización Individual is compulsory for all employees entering the work force and voluntary for the self-employed. All workers covered in the old systems (Social Insurance Schemes) had the option of switching to Sistema de Capitalización.
The Sistema de Capitalización Individual covers the majority of workers in Chile. The remainder are covered by the Social Insurance Schemes or by special systems for key groups such as the armed forces and national police.
Both Sistema de Capitalización Individual and Social Insurance Schemes operate under the auspices of the Ministry of Labor and Social Security (Ministerio del Trabajo y Previsión Social).
On 1 July 2008, the Chilean government introduced the Sistema de Pensiones Solidarias or Solidarity Pension System. This new first pillar, a supplement to the 27 year old individual accounts system, expands coverage and provides both a non-contributory and a top-up benefit.
The non-contributory basic solidarity pension is called the Pensión Básica Solidaria (PBS). It is a means-tested benefit (old-age and disability) paid to those individuals aged 65 or older who are not eligible for any other pension. To qualify for an old-age PBS, an individual must have lived in Chile for at least 20 years, including 4 of the 5 years immediately prior to applying for a benefit.
A top-up (old-age and disability) benefit called Aporte Previsional Solidario (APS) is paid to those individuals who have contributed to an individual account and whose self-financed monthly benefit in 2008 is between 50,000 and 150,000 pesos.
The central administration for the Ministry of Labour and Social Security (Ministerio del Trabajo y Previsión Social) is in Santiago.
The Ministry of Labour and Social Security (Ministerio del Trabajo y Previsión Social) supervises the operation of Chile's social security system through the Superintendencia de Pensiones to guarantee the rights of those applicants covered in the legislation.
Prior to 2008, there were 2 administration agencies:
- The Institute of Social Security Standardisation (Instituto de Normalizacion Previsiónal - INP) administered age, invalid and survivors' pensions under the old schemes (Social Insurance Schemes).
- The Superintendency of Pension Funds Administrator (Superintendencia de Administrados de Fondos de Pensiones - SAFP) was the State's supervisory body within the Chilean pension system of individual accounts - Sistema de Capitalizacion Individual.
Chile's non-contributory payments
There is a safety net welfare system in Chile that pays benefits to people in need. To qualify for assistance a person must be:
- devoid of resources - the person does not have their own income or have income less than 50% of the minimum pensions, and
- a continuous resident in the country of at least 3 years immediately prior to the date the person makes a claim.
Act reference: SS(IntAgree)Act Schedule 15 Chile