Chile presidential candidate Pinera would modify pension system

SANTIAGO (Reuters) - Chilean presidential candidate Sebastian Pinera said on Wednesday that the state would increase its support of poorer pensioners if he were elected, but he stopped short of the more radical reform proposed by incumbent President Michelle Bachelet.

FILE PHOTO: Sebastian Pinera (L) greets the crowd after signing an economic investment protocol in Cartagena city February 10, 2014. REUTERS/Jose Miguel Gomez

Conservative hopeful Pinera led Chile between 2010 and 2014 and is the favorite to win the November vote or the likely second round run-off in December.

One of the most immediate issues he is likely to face is what to do with Chile’s highly privatized pension system, which was introduced in the 1980s and has been widely imitated around the world, but which has faced angry protests in recent years by Chileans claiming they have been short-changed.

Pensions in Chile are managed by six powerful private pension fund administrators, known as AFPs, holding some $160 billion in assets.

Center-left Bachelet has pledged to send a bill to Congress this month that will increase contributions to 15 percent from 10 percent, with the hike paid for by employers. The extra money would be managed by a new state-run fund and 2 percentage points would go to a collective account aimed at supporting the poorest.

However, the governing coalition has become increasingly divided in recent months and it is not clear if the bill will pass before Bachelet’s term ends in March 2018, potentially leaving the reform in the hands of the next government.

Pinera criticized Bachelet’s plan, saying that he would prefer to gradually raise contributions to 14 percent, but with no state-run fund and no collective account.

“Pension savings belong to Chilean workers and nobody has the right to seize them,” he said in a speech on Wednesday.

He said he would help the poorest by increasing state subsidies for them from the current level of 0.8 percent of gross domestic product to 1.14 percent, at a cost of around $700 million.

Center-left presidential candidate Alejandro Guillier has indicated he would likely continue with Bachelet’s reform if elected, while leftist Beatriz Sanchez has called for the AFP system to be completely scrapped.

Reporting by Antonio de la Jara; Writing by Rosalba O’Brien; Editing by Sandra Maler