Chile passed the Universal Guaranteed Pension bill that increases the pensions of 2.4 million people. Financed by taxes on real estate and luxury goods, the complimentary payment is not universal.
The Chamber of Deputies unanimously approved on January 26 the Universal Guaranteed Pension bill that guarantees a complimentary pension to Chileans.
The law guarantees a complimentary pension of up to 185,000 pesos (US$231) a month.
The legislation is ready to be enacted by president Sebastián Piñera. Payments sent to the population should start as soon as February.
Eligible people are over 65 and can prove they lived in Chile for at least 20 years since they were 20, whether they are retired or not. They cannot be part of the 10% richest population and should have a basic pension lower than 1 million pesos (US$1,246) a month.
Approximately 2.4 million Chileans will benefit from the payments while the country’s inflation rate rose to 7.2% in 2021, the highest level since 2007.
For the Minister of Labor and Social Welfare, Patricio Melero, the law guarantees that no pension will be below the poverty line.
Small increase for people not eligible for any basic pension
For Alejandro Guillier, left-leaning presidential candidate in 2017, the law is a “response to a national emergency situation and a failure of the individual capitalization system of pensions that did not fulfill its promise”.
The Universal Guaranteed Pension was originally thought of as a complimentary pay for all pensioners. But it is not universal per se.
Chileans with no pension at all will not see much of an increase at the end of the month.
Chileans who are not eligible to receive any State pension already receive a Basic Solidarity Pension of 176,000 pesos a month. The new law will not increase their revenue much as they will only perceive 9,000 pesos more.
The law has also eventually excluded the 10% richest after debates in the legislative chambers.
To finance the law, Chile considered applying a wealth tax but instead applied various series of measures to increase taxation.
Chile creates a new 2% tax on luxury goods such as yachts, helicopters, private jets and expensive cars.
Lawmakers also increased tax on real estate, for instance by suppressing VAT credits for real estate companies and removing exemptions related to rental income.
Few days ago, Chilean lawmakers voted on a decade-old reform of Water Code.