For four decades, Chile has been a pension reform laboratory. His overhaul of the 1980s, based on individual capitalization, transformed retirement savings into Latin America. Compulsory contributions, managed private by retirement administrators (AFP), have built one of the deepest capital markets in the region and transformed Santiago, the capital of Chile, in a regional financial center. Sovereign bonds have been sought, abundant IPOs and foreign investors have seen Chile as a model of modernity.
This prestige has since disappeared. The low self -funded replacement rates – a median of 17% between 2015 and 2022 – left unsatisfied workers. Mistrust with regard to AFP, often accused of charging high costs for intermediate yields, has increased. Then came the pandemic, when the Chile Congress authorized three extraordinary withdrawals. More than 50 billion dollars drained between 2020 and 2021, which represents more than 20% of the individual pension funds accumulated by 2019 and sixteen percent of the GDP of Chile 2022. For households, it was a rescue buoy; For capital markets, a break. Liquidity has dropped, the program slowed down and a long-term savings pool once considered a sacrosanct.
In March 2025, the congress approved a long -awaited retirement reform, replacing the “multifundi” model with generational funds. Multifuds allow workers to choose from variable risk portfolios, but many affiliates were poorly equipped, often chasing short -term yields or stuck by default incompatible. The new generational funds apply “the investment of the life cycle”. Young savers are placed in heavy capital portfolios, gradually moving to obligations as they age. Economists argue that this reduces errors and produces more stable results. The regulators consider it common sense: align the portfolios with demography rather than a calendar on the market.
The reform also adds the contributions of employers, stimulates the guaranteed universal pension, an advantage funded by the State to guarantee a minimum pension to the elderly, which they regularly contribute to the private AFP system. The reform also obliges competition by auction cases to the lowest suppliers every two years instead of four. These measures should increase replacement rates, exert pressure on AFPS to reduce costs and improve efficiency and distribute the faster risk.
However, the reform remains cautious. Generational funds make portfolios more rational but save more passive. Transparency is limited, heavy switching suppliers and shallow engagement. This conservatism may leave the pensions of modern but analog chili in the mind. All over the world, finance changes quickly. Digital portfolios, open bank and tokenization reshape the way capital is increased and invested. The Chile model, even with generational funds, could solve yesterday’s problems with yesterday’s tools.
The most promising innovation lies in tokenization: representing obligations or actions on digital books. This promises faster, lower costs and greater transparency without modifying the underlying asset. Europe has launched its DLT pilot regime, and the six digital exchanges in Switzerland already emit tokenized obligations. Chile is not sitting on his hands. In 2023, its law for innovation of financial technology created a regulated framework for open financing companies and cryptography. Officially launched in 2020, the Santiago Stock Exchange (BCS), the Central Securities Depository (DCV) and Telco GTD launched Auna Blockchain, the first Blockchain Consortium in Latin America, to test bonds and token actions. If it is managed in a cautious way, this change could transform Chile into a regional center for investment in institutional cryptography and make initiatives like Scalex Santiago Venture, Corfo and Plus Dynamic Start-up by channeling digital economies in startups. Tokenization would reduce not only costs and accelerate regulations, but also increase transparency, improve liquidity thanks to fractional property and expand market access. These characteristics could give more confident exposure to innovation while pushing the financial infrastructure of Chile to greater efficiency and global integration.
More controversial is the crypto. Could Chile’s retirement savings ultimately include Bitcoin? Maybe, but not yet. For this to happen, the law must be modified to explicitly recognize digital assets as eligible instruments for the investment of retirement savings. The country’s central bank must also approve them and regulators must apply the standards of childcare, evaluation and risk. Even then, exposure would require caution. Direct Coin Holdings would come up against prudential rules. At a minimum, the exposure must happen through regulated ETFs or negotiated tickets in exchange (ETN), with explicit legal recognition and strict ceilings. Experiments from other countries with cryptographic investments show the challenges. Germany allows certain pension vehicles to invest up to 20% in the crypto. New Zealand Kiwisaver has tried crypto via ETF. Some American public funds have bought Bitcoin products. But Ontario teachers from Canada and the Quebec CDPQ have lost a lot in companies that failed like FTX and Celsius. The lesson: Prudence must prevail.
Chile could find a balance with a double path. Tokenized bonds and shares must be treated as equivalent to those conventional if they are issued on regulated sites. In my opinion, exposure to crypto, if authorized, should only come by FNB or ETN, initially capped at 1% to understand the market, but should be authorized to reach at least 25% of the allocation of shares. The approved guard, the segregation of assets and the insurance would be compulsory. Complete disclosure of volatility and lower risks should be necessary so that savers know what is at stake. Such a roadmap would open pensions to innovation without compromising stability. And by integrating tokenization into traditional savings, it could accelerate the digitization of the Chile financial services ecosystem, the creation of standards, brokers and insurers should follow.
But the technical corrections alone cannot rebuild confidence. Chile’s retirement debate concerns legitimacy as much as design. To remedy this, the reforms could go further. Performance -based discounts could link AFP costs to results, by rewarding long -term outperformance. The “open pensions” platforms could reflect open banking services, offering affiliates in real time comparisons for costs and yields. Sandboards could test token funds and smart contracts. Allowing a saving ribbon to serve as a mortgage guarantee could mitigate tensions between young workers, who feel locked in the housing markets, and retirees requiring higher pensions – softening intergenerational strains without undermining long -term funding, while keeping intact pension objectives. Affiliates should also share more directly in the upward gains. An idea would link extraordinary profits to workers’ accounts: when returns beat a reference, the surplus would be credited under supervision monitoring. This would make partners to be successful in success and maintain AFPS responsible for performance, not just the scale.
Chile deserves the merit of having moved where its neighbors Dawdle. Argentina has obtained control between the state and private control. The Brazil system is large but fragmented. Mexico reforms remain disputed. Chile continues to adapt, but cautiously. But the issues are high. Move too slowly, and the capital markets risk stagnation, hungry for long -term savings. Move too quickly and pensions could be taken in cryptographic storms. The balance between prudence and innovation is delicate.
Generational funds will make pensions of elegant chili on paper, aligning portfolios with demography and reduction of expensive errors. But without a more in -depth innovation in technology, transparency and commitment of citizens, the system can remain analog at heart. The design of pensions today is not only to adjust contributions or adjustments. It is a question of exploiting technology, safeguarding confidence and giving citizens an active role in training their financial future. If Chile manages this balance, it could again establish the regional standard. Well done, pensions could catalyze the modernization of all financial infrastructure. Otherwise, Chile can be found with a modern form system but creaking below, intended for another reform and another crisis of confidence.
