Millions in Chile tap into pension funds amid pandemic
New law allows Chileans to withdraw up to 10 percent of their retirement savings, as economy takes hit.
Millions of Chileans are dipping into their pension funds as a new law took effect allowing citizens to withdraw a portion of their retirement savings to help ease the economic pain brought by the coronavirus pandemic.
The emergency measure, approved by the Congress last week, allows people to withdraw up to 10 percent of their contributions for the next year. On Thursday, long lines were seen in the capital, Santiago, outside the offices of Pension Fund Administrators (AFP) as Chileans sought to take advantage of the new law.
Chile’s Superintendent of Pensions said in a statement 3,024,347 people had asked to withdraw their share by 5pm local time (21:00 GMT).
The websites of several of the fund administrators collapsed amid the deluge of requests, prompting an apology from the companies.
“As we warned from the beginning, this process is unprecedented and we have had to quickly prepare all the platforms,” said Fernando Larrain, president of Chile’s association of pension fund managers.
Reporting from Santiago, Al Jazeera’s Lucia Newman said: “With so many people trying to request their money simultaneously on just the first day, the process is torturously slow.”
Officials said it would take 10 business days for the first payouts to arrive. The influx of cash into the pockets of everyday Chileans, hard hit by the financial fallout from the virus, is largely expected to boost the economy.
Chile’s privatised pension system, introduced in the 1980s under dictator Augusto Pinochet, has often been hailed as a model, but has also been strongly criticised in recent years for low payouts.
The coronavirus pandemic, that has infected more than 350,000 people and killed nearly 9,000 in Chile, has plunged what was once Latin America’s strongest economy into a deep recession, leaving almost 2.5 million out of work.
‘Can’t survive without money’
In a landmark vote last week, lawmakers, including 53 percent of centre-right President Sebastian Pinera’s governing coalition, gave the green light to the pension reform bill that sped through several congressional votes with cross-party support despite staunch government opposition.
Economists and ministers have said withdrawing from pension funds will diminish already low average payouts and deliver a shock to stock, bond and currency markets.
The bill’s supporters said alternative support offered by the government to millions of citizens left unemployed and impoverished by the pandemic was insufficient and bureaucratic.
“I don’t like to dip into my pension, but we can’t depend on the government for everything, so I want to access my own money, especially since the private pension funds have filled their pockets at our expense for decades,” Alfonso Expinoza, a pension fund contributor, told Al Jazeera.
Claudia, another Santiago resident, who queued up outside her private pension fund office, said: “I’ve been on medical leave since March and I haven’t received any government benefits. I’m not getting my full wages to pay for my medicine and my upcoming surgery. So this is very necessary for me.”
It is estimated that approximately 10 million people will use some $20bn from the AFP funds to pay debts accumulated during the five months of the pandemic. According to opinion polls, most in the country of some 19 million people said they would use the money to pay for basic goods and services.
“I have no work any more, but have to keep paying the rent, eating and buying necessities. Without money you can’t survive,” Venzki, a Haitian migrant, said.