The Chilean pension withdrawals and the 2025 reform: Fiscal and retirement consequences

Abstract During the COVID-19 pandemic, Chile enacted three exceptional laws allowing withdrawals from affiliates’ pension accounts. We analyze how these withdrawals affected pension savings and the projected retirement income of affiliates and their households, finding that lower-income households withdrew a higher percentage of their savings. Simulations of worker contributions until retirement show an average reduction of 21% in contributory pensions, but increased non-contributory pension benefits reduce the average total income loss to 8%. Under a no-reform scenario, these withdrawals and higher non-contributory pensions may imply fiscal costs around 15.8% of the pre-pandemic gross domestic product (GDP). The current pension reform should reduce it to 12.4% of pre-pandemic GDP.