Please be invited to the upcoming Latvijas Banka’s Research seminar, to take place on 2 July 10:30-12:00, in which Alejandra Inzunza (Bocconi University, Central Bank of Chile) will present her work: The Chilean Pension Withdrawals and the 2025 Reform: Fiscal and Retirement Consequences?
Abstract. During the COVID 19 pandemic, Chile approved three exceptional laws that allowed workers to withdraw part of their pension accounts. These withdrawals were exceptionally large by international standards. The withdrawals reached around 20% of GDP and depleted the contributory balances of millions of affiliates. Using administrative withdrawal records matched to the 2021 Chilean Household Finance Survey, we estimate that the withdrawals reduced contributory pensions by about 21% on average. The expansion of non contributory pensions in 2022 cushioned the loss in total retirement income to about 8%, although with significant fiscal costs. The Chilean pension reform of 2025 increased the future contribution rate. Our simulations show that this reduces the estimated fiscal burden from 15.8% to about 12.4% of GDP. Future policies such as increasing the retirement age could further lower this cost.