Key dates in the Chilean Pension Reform

Alessandri - On March 26, 2025, Law No. 21,735 was published in the Official Gazette, introducing the most important reform in decades to the Chilean pension system (the "Law"). It gradually but significantly increases mandatory contributions, part of which will be administered by a new state fund (FAPP) to pay certain benefits defined in the Law, introduces an additional level of limits on implicit commissions, replaces the current types of pension funds with generational funds and introduces biannual bids for 10% of the accounts of the affiliates entre muchas otras modificaciones.

The deadlines for the entry into force and implementation of many provisions have started to be counted as of the date of publication of the Law.

1. General transitory provisions:
The Superintendency of Pensions will acquire additional powers on March 26, 2025.
All necessary decrees must be published before March 26, 2026.
Most of the provisions will come into force on April 1, 2027, with exceptions as set out below.

2. Employer contributions to the pension system:
The first increase in employer contributions begins on August 1, 2025 at 1.0%. They then continue to increase progressively once a year until reaching 8.5% on August 1, 2035, with allocations to various accounts, including the FAPP and each worker’s individual account with the corresponding AFP (called individual capitalization account).

As of August 1, 2026 the allocation will be:
0.1% to the worker’s individual account with the corresponding AFP.
0.9% to the FAPP as an interest-bearing loan to be repaid at the time of retirement.
2.5% to the FAPP
On August 1, 2035, the allocation will be 4.5%, 1.5% and 2.5%, respectively.

Only as of 2045 will there no longer be a loan to the FAPP, so that the allocation of contributions will be 6% to the worker’s individual account with the corresponding AFP and 2.5% to the FAPP.

3. Contributions of self-employed workers:
Contributions for self-employed workers will follow the same gradual schedule as for dependent workers.

4. Social Security Pension (SSP):
Defined benefits financed by the FAPP will be phased in starting January 1, 2026. These will include various types of insurance and indemnities, such as the benefit for years contributed and compensation for differences in life expectancy between men and women, which will come into effect in 2026.

5. Universal Guaranteed Pension (UGP):
The amount of the PGU will gradually increase according to age starting September 1, 2025.

6. FAPP:
The key appointments and regulatory framework of the FAPP, including the promulgation of its investment regime and the awarding of tenders for the management of the FAPP investment portfolio, will be established by mid-2026.

7. Limit on implicit commissions:
The cap on total implicit fees (including fees of foreign funds in which pension funds invest) to be established by the Investment Regime shall be published by April 1, 2026 and shall become effective on November 1, 2026.

8. Generational funds:
September 1, 2026:
Deadline to publish the Investment Regime that establishes the investment limits and reference portfolios applicable to the minimum of ten generational funds managed by the AFPs and based on age cohorts of contributors (Generational Funds) and that will replace the current type A, B, C D and E pension funds.
April 1, 2027:

Date on which the Generational Funds to which the assets of the current type A, B, C D and E pension funds must be transferred begin to govern.
Effective date of the reference portfolios that will serve as benchmarks for these Generational Funds.

9. Bidding of groups of affiliates
During August 2027: The Government must start bidding every two years for 10% of the AFP accounts of future affiliates.
December 2027: The first awards of tenders for groups of members will take place.
10. Reduction of the mandatory reserve requirement of the AFPs

Until March 31, 2027: The AFPs must maintain a reserve of 1% of the value of each Pension Fund as a regulatory guarantee for deficits in the profitability of the pension funds.
April 2027: The reserve is now based on the AFP’s income from commissions.

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