TN 1 (06-14)

The Chilean Social Security System provides retirement, survivors and disability benefits through two major schemes; the old “social insurance” system and the new “private insurance” system.

A. Old social insurance system

The Superintendence of Social Security oversees the social insurance system. This traditional government-administered system financed by employee and employer contributions pays retirement, survivors and disability benefits. Chile bases these benefits on a worker’s average earnings and the length of coverage. For the purposes of the agreement, Chile classifies workers according to three categories:

1. salaried employees;

2. wage-earners; and

3. public employees and journalists.

B. New private insurance system

In 1981, the Chilean government established a new "private insurance" system that is State-regulated, but administered by the private sector. Under the private insurance system, employees contribute to individual capitalization accounts. Pension Fund Administrators are private investment companies that manage these accounts. Chile bases benefit amounts on the investment yield of individual accounts. The private insurance system became mandatory for all workers entering the labor force after 1982. Workers covered under the social insurance system in 1982 had the option to remain in the old pay as you go system. While the private system covers the vast majority of active workers, both systems continue to operate side-by-side until Chile phases out the old system.