Sol Foundation study: workers with $100 million in their AFP accounts get a self-funded pension less than the minimum wage

A new study by Fundación Sol reveals that workers in Chile with up to $100 million saved in their private pension accounts receive an unfunded pension below the minimum wage. The research, conducted by economists Marco Kremerman and Francisca Barriga, highlights the challenges faced by retirees under the country's current pension system. According to the findings, half of the 150,000 individuals who retired in 2025 received pensions, calculated solely based on their personal savings and excluding state subsidies, that were less than $86,000 per month. This amount falls significantly below the minimum wage set in December 2025, which was $529,000 annually. The study underscores the precarious financial situation of many retirees. It found that 73.1 percent of men aged 60 to 64 have savings below $50 million, while the figure rises to 85.5 percent among women aged 55 to 59. Those who contributed to their pensions over 35 to 40 years managed to secure a median retirement income of around $290,000, a sum equivalent to just 55 percent of the minimum wage. Kremerman explained that even individuals with substantial savings face difficulties in securing adequate pensions. For example, a 65-year-old man with a spouse aged 62 and $100 million in his pension fund would receive approximately $465,851 monthly through programmed retirement or $439,047 via lifetime annuity. A woman of similar age, with a spouse aged 63 and the same level of savings, would get about $412,387 in programmed retirement or $385,541 in a lifetime annuity. These figures fall far short of the minimum wage threshold, indicating a systemic issue within the pension framework. The study also points out that the Association of AFPs, representing private pension administrators, attributes these shortcomings to external factors such as market dynamics and misalignments in the system’s parameters rather than poor management by the administrators themselves. In response, the association has advocated for increasing contribution rates and raising the retirement age to address the growing gap between savings and required pension amounts. This debate occurs against the backdrop of Chile's aging population. According to data from the Economic Commission for Latin America and the Caribbean (CEPAL), the country's population is projected to reach 20.5 million by 2040, with nearly 4.4 million individuals over the age of 65. At that time, life expectancy for both genders is expected to reach 83 years, further complicating the sustainability of the existing pension model. Kremerman warned that the current trajectory could lead to a pension crisis within ten to fifteen years. He emphasized the need for urgent reforms to ensure the long-term viability of the system. His comments reflect broader concerns about the adequacy of pensions in a rapidly changing demographic landscape, where traditional models of retirement security are increasingly challenged by economic and social shifts.