SANTIAGO – Chilean President Gabriel Boric’s administration on Tuesday sent a bill that limits pension withdrawals to debt payments, hours before a congressional committee was set to vote on another proposal allowing a 10% withdrawal of pension funds.
Both proposals permit workers to withdraw pension funds before retirement to help deal with economic fallout from the COVID-19 pandemic. However, the government argues a blanket withdrawal will pump too much money into the economy and spur inflation, and is instead proposing withdrawals should only be used to pay back debt.
“We are confident that what we are proposing as an alternative [to congress] is clearly superior and that makes it unnecessary to expose citizens, particularly those with lower incomes, to increases in inflation that will further deteriorate their purchasing power,” said Finance Minister Mario Marcel, who introduced the new bill.
“It is a way of making pension funds saved by workers available for matters in which their use does not imply higher inflation, higher demand or higher consumption,” he said.
The new proposal also sets a 10% withdrawal ceiling, but limits access to pension funds for alimony payments, mortgages and other debts. The bill also bolsters unemployment insurance.
“These are resources to lower the [burden] of a debt or pay alimony,” he added.
Marcel presented the plan alongside Giorgio Jackson, the secretary-general of the presidency and Boric’s liaison with congress. Jackson said it’s now up to legislators to see “how this (the proposal) affects the processing of the other project.”
Since July 2020, Congress has allowed three withdrawals for workers to cash in 10% of their pension fund, but a fourth withdrawal was voted down last December.
Boric supported the four previous withdrawals, but opposes the another withdrawal citing the effect on inflation and Chile’s economic recovery.