Proposal to allow Chileans to draw down pensions would hurt business climate, group says

October 5, 2021

SANTIAGO (Reuters) – An association of U.S. businesses in Chile warned on Tuesday that a proposal to allow Chileans to draw money from their pension funds for the fourth time since the coronavirus pandemic began could seriously harm the country’s business climate.

Chile’s lower chamber of Congress approved the bill late last month, but it faces more resistance in the Senate, where right-leaning lawmakers allied with the administration of President Sebastian Pinera have opposed it.

“This new withdrawal of pensions, and particularly of life annuities, … causes severe damage to Chile’s image as an attractive destination for foreign investment,” the Chilean-North American Chamber of Commerce said in a statement.

Chile’s government and central bank have also warned a fourth withdrawal would harm the pension system, hitting the poor the hardest in the long term. Opposition lawmakers, however, say the cash is a lifeline for many Chileans suffering from the economic impacts of the coronavirus pandemic.

Before the pandemic, Chileans were largely prohibited from tapping into their pension funds until reaching retirement age. But the economic effects of the pandemic since March 2020 led Congress to approve three withdrawals, each allowing citizens to cash in 10% of their pension fund.

This fourth withdrawal would allow for an additional 10%.

Amcham and Chilean financial regulators have expressed special concern about a clause that would allow retirees who have purchased an annuity to obtain an advance of up to 10% on their funds from insurance companies.

“The approval of a bill of these characteristics leads to severe damage to the confidence in Chilean institutions, impacting on foreign investment and contravening Free Trade Agreements signed for Chile,” Amcham said.

Chile’s financial regulator earlier warned that the terms of the bill could potentially make insolvent nine insurers that deal in the annuities.

(Reporting by Fabian Cambero and Dave Sherwood; Editing by Cynthia Osterman)

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