Our Labor Group Director, Jocelyn Aros, spoke exclusively with LexLatin, where she explained the impact of Chile’s pension reform and its influence as a model for the region.
Chile is moving forward with the implementation of its pension reform, enacted through Law No. 21,735, with a new adjustment to the universal guaranteed pension (PGU). As of February 1, 2026, the benefit amount was updated based on the change in the 2025 Consumer Price Index.
The measure is part of the mixed system promoted by the administration of former President Gabriel Boric and maintains individual capitalization in the hands of the Pension Fund Administrators (AFP), but incorporates solidarity-based components financed with employer contributions, in addition to expanding state coverage.
What is changing in the Chilean pension model?
To understand the regional scope of the reform, Jocelyn Aros, director of the Labor Group at Albagli Zaliasnik, explains that different models coexist in Latin America: some based on mandatory individual capitalization, others on predominantly public pay-as-you-go systems, and various mixed schemes that combine both components.
For decades, Chile served as a regional benchmark due to its early adoption of a mandatory individual capitalization model administered by the AFPs, with a limited solidarity component. That design shaped the Latin American pension debate for over 30 years.}
“Currently, the Chilean pension system has transitioned to a more mixed model, a shift that is even more evident with the recently approved pension reform, so that, without losing its individual capitalization character, the solidarity component is strengthened, creating a new social insurance funded by an additional employer contribution, which goes hand in hand with the strengthening of the Universal Guaranteed Pension (PGU), which is an eminently state-run benefit.”
In his words, the individual savings component is maintained, but greater redistribution and collective financing are incorporated.
Who is eligible for the PGU?
The Universal Guaranteed Pension is intended for individuals aged 65 or older who receive pensions of up to 1,252,602 pesos and who do not belong to the top 10% of income earners in the country.
To qualify for this benefit, citizens must prove residency in Chile for at least two decades starting at age 20—whether continuous or intermittent—or four years within the five years prior to the application. Verification is based on information from the Social Household Registry and other public databases.
As of February 1, 2026, Chileans aged 65 to 81 are eligible for a maximum amount of 231,732 pesos (267 dollars). People aged 82 or older receive up to 250,000 pesos (288 dollars). This latter group had already reached 250,000 pesos in September 2025 and now includes the inflation adjustment.
The increase, adjusted for 2025 inflation, is implemented in stages:
- Ages 65 to 74: The benefit amounts to 231,732 pesos, with the goal of reaching the maximum of 250,275 pesos in September 2027.
- Ages 75 to 81: They will receive up to 250,275 pesos starting in September 2026.
- Ages 82 and older: They already receive 250,275 pesos (the amount originally reached in September 2025 and now adjusted for CPI).
The reform also included pensioners under reparation laws, recipients of ex gratia pensions, and beneficiaries of mutual aid pensions granted by the National Defense Pension Fund and the Chilean Police Pension Office. These groups may request a supplement to reach the current value of the PGU, provided they do not receive another pension under a different system and meet the established conditions.
According to recently released official figures, more than 1,370,000 retirees in Chile received pension increases this year. Of the total, more than 412,000 women received payments linked to the recognition of contribution years and a compensation mechanism aimed at reducing the structural gap between women’s and men’s pensions. This measure seeks to equalize the amounts received by women relative to men with comparable work histories as part of the new mixed scheme.
The Chilean pension reform also included increases in the Basic Solidarity Disability Pension, which will reach 250,275 pesos (approximately USD 285.31) as of September 2025; in the Solidarity Disability Pension Contribution, which provides a supplement up to the new maximum; and in the Disability Subsidy, set at 125,138 pesos (about USD 142.66).
In this regard, nearly 750,000 pensioners received increases in disability pensions, disability subsidies, and benefits derived from reparation laws, thereby expanding the pool of beneficiaries affected in this first phase of implementation. These adjustments are part of the effort to strengthen the solidarity component of the system, which encompasses not only the PGU but also other state benefits.
For the business sector, expert Aros emphasizes, this translates into the implementation of economic and operational changes. The new employer-paid contribution entails a gradual increase in labor costs, which requires a review of budgets, salary structures, and medium- and long-term financial projections.
Likewise, companies will need to adapt their pension compliance systems, update administrative processes, and strengthen their control mechanisms to ensure the proper application of the new obligations.
Impact on Companies and the Labor Market
The new pension system is funded by an additional contribution paid by the employer. For Aros, this means a change in the structure of pension contributions.
“If the pension reform is going to mean a change in the structure of pension contributions that results in an increase in employer contributions, it should be implemented gradually so that the impact on costs is not too abrupt and ends up affecting the labor market,” she comments.
The director of the labor group at Albagli Zaliasnik maintains that the effect is not limited to increased contributions. Companies will need to adjust salaries, adapt pension compliance systems, coordinate adjustments with payroll providers, and update internal procedures to ensure the correct calculation and reporting of the new contributions.
Additionally,the specialist highlights the role of the government in implementing clear administrative mechanisms and strengthening oversight capabilities, as well as ensuring proper management of the new funds, among many other challenges.
In Latin American economies with high levels of informality, a significant increase in costs can influence hiring and formalization decisions; therefore, the way Chile phases in the increase over time will be closely watched by other countries considering similar reforms.
Can this model influence other reforms in the region?
“The Chilean reform could become a regional benchmark, not so much because of the model itself, but because of the transition it proposes—that is, moving from a predominantly individual model toward a mixed system that combines individual savings, intergenerational solidarity, and the strengthening of pensions.”
The Chilean experience combines three elements: maintaining individual savings, strengthening a state benefit, and creating a solidarity component funded by employers. For Aros, its potential regional impact will depend on certain conditions.
Among these, he mentions fiscal sustainability, the administrative capacity to manage funds, and effective oversight systems. He also highlights the need for political stability.
“Chile’s pension reform differs from the major ‘problems’ of other models: insufficient pensions, purely individual systems, and the high fiscal cost of pay-as-you-go systems.”
The Chilean case, the lawyer asserts, introduces a scheme in which the employer assumes a greater role in collective financing, while the state reinforces basic protection and individual capitalization is maintained.
For companies in the region, the Chilean reform offers a precedent for how a change in the pension structure can lead to greater financial and operational obligations. For neighboring governments, it poses the challenge of balancing social protection and economic sustainability under rules that remain stable over time.
