Piñera's US$1.5bn pension reform proposal

Chilean presidential candidate Sebastián Piñera said his planned pension reform would strengthen both the fully funded defined-contribution pension system and the state-funded solidarity pillar.

His comments, made at a conference in Santiago on Thursday, come a day after he publicly expanded on his reform plans.

The incumbent government, meanwhile, is due to submit its own pension reform bill next week.

Piñera, running for president in November, affirmed that he wants employers to contribute 4% which would lead to an increase in pension size of 40% – the government is likely to seek a 5% contribution. Currently, each month 10% of an affiliate's salary goes into their pension pot and employers are not required to make a contribution.

During his presentation on Wednesday, Píñera was reported as saying by local press that the 4% would go into the pension savings funds of affiliates. The current government has proposed that the employer contribution is managed by a state entity.

Piñera also said during Santiago-based Moneda Asset Management's 15^th international conference that he wants the government to increase its contribution to the solidarity pension pillar to 1.14% from 0.8% of GDP, which works out to almost an extra US$750mn. The move, he said, would raise basic pensions and lead to greater coverage.

On top of this, the government - as an employer - would have to contribute 4% of the salaries of civil servants which would work out to an additional US$750mn or so, he said.

He is also planning to offer, as an incentive, financial support to private pension fund affiliates once they have made a specific number of payments into their pots, among other conditions. Additional support would be given to female affiliates. Piñera, who was president from 2010-14, also affirmed he plans to incentivize affiliates to postpone their retirement.

President Michelle Bachelet has said that once the government's planned reform is implemented it will allow for an immediate 20% increase in private pensions and a boost of 50% in the longer term.

(Pictured: Chilean presidential candidate Sebastián Piñera pictured on the campaign trail.)