Chile: Selected Issues
IMF Staff Country Reports, July 8, 2026
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- Chile: Selected Issues
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Bibliographic details
- Published: July 8, 2026
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798229052887.002
Overview
- Focus: Chile’s pension reform with emphasis on expanding the solidarity pillar through the Minimum Guaranteed Pension (PGU).
- Analytical approach: Microdata analysis and simulations of the future distribution of pension savings under alternative indexation rules and reform scenarios to evaluate the long-term cost of the current PGU design.
- Core concern: The PGU is designed with a tapered benefit structure but, in practice, benefits are effectively untargeted, producing a substantial and growing fiscal burden.
Fiscal implications and scenario analysis
- PGU cost significance:
- The PGU represents roughly one-third of the estimated cost of the pension reform.
- Methods:
- Simulations of future distribution of pension savings under alternative indexation rules and reform scenarios to quantify long-term fiscal costs.
- Main simulation emphasis:
- Alternative indexation rules (including mechanisms that could lead to automatic convergence with wage growth).
- Reform scenarios that adjust eligibility and retirement ages.
Key findings
- Targeting:
- Microdata analysis indicates that, despite a tapered benefit design, PGU benefits are effectively untargeted in practice.
- Fiscal trajectory:
- The untargeted nature of PGU benefits leads to a substantial and growing fiscal burden under the current design.
- Indexation:
- Indexation mechanisms that allow automatic convergence with wage growth materially increase long-term fiscal costs in simulations.
- Eligibility and retirement age:
- Maintaining current statutory retirement age and PGU eligibility age contributes to larger fiscal pressures as life expectancy improves.
Policy recommendations (to strengthen long-term fiscal sustainability)
- Better targeting of benefits:
- Redesign PGU eligibility or tapering to ensure benefits reach intended low-saving retirees and reduce leakage to better-funded retirees.
- Prudent indexation:
- Maintain an indexation mechanism that avoids automatic convergence with wage growth to limit rising fiscal liabilities.
- Gradual age adjustments:
- Gradually increase both the statutory retirement age and PGU eligibility age in line with improvements in life expectancy.
- Trade-offs:
- Recognize that these measures have important distributional consequences; policy design should balance equity and fiscal sustainability.
Distributional considerations
- The analysis acknowledges important distributional consequences of better targeting, prudent indexation, and gradual increases in retirement and eligibility ages.
- The paper focuses on how these measures contribute to strengthening long-term fiscal sustainability rather than resolving distributional trade-offs.
Source: Chile: Selected Issues (IMF Staff Country Report No. 2026/170, July 8, 2026).
Content in this bundle
- Chile: Selected Issues; IMF Country Report No. 26/170; June 18, 2026