A new law enacted on August 28 eliminates the health care contribution for pensioners who receive means-tested benefits and lowers the contribution rate for middle class pensioners. Beginning November 1, a pensioner whose benefit is less than CLP 255,000 (USD 490) a month will no longer be required to pay monthly contributions for health care. In November 2012, the health care contribution for middle class pensioners (the fourth income quintile) will be reduced to 5 per cent of covered earnings. (The current contribution rate is 7 per cent of the pension or covered earnings.) As a result, the "net" retirement benefit will increase by 7 per cent for some 700,000 pensioners and by 2 per cent for more than 300,000 pensioners. President Piñera assured pensioners that their medical benefits will remain the same. (The public national health system provides medical care at no additional cost to individuals older than age 60.)
Chile's 2008 pension reform established a new solidarity pillar as a supplement to the existing privately managed individual accounts. That new pillar provides two types of means-tested benefits: a non-contributory pension and a top-up benefit for self-financed pensions less than CLP 200,000 (USD 384) a month, rising to CLP 255,000 (USD 490) in July 2012. To qualify for either means-tested benefit, an individual must-
- Be aged 65 or older;
- Not be eligible for any other pension;
- Have lived in Chile for at least 20 years, including 4 of the 5 years immediately prior to applying for a benefit; and
- Be a member of a family that is rated among the 60 per cent poorest in the country.
This article was extracted from the United States Social Security Administration publication International Update, October 2011.
Source: Social Security Programs Throughout the World: The Americas 2009, US Social Security Administration; "Piñera Anuncia Indicación para Eliminar Cotización de Salud a 700 Mil Pensionados," Emol.com, el 20 de junio de 2011; "Chile," International Update, July 2011, US Social Security Administration; "Senado Chileno Aprueba Ley que Elimina Cotización de Salud de 7% a la Tercera Edad," América Economía y Mercados, el 18 de agosto de 2011; Ley 20.531, el 29 de agosto de 2011.
Legislation date: 08.2011