For four decades, Chile has been a pension reform laboratory. Its revision from the 1980s, based on individual capitalization, transformed retirement across Latin America. Mandatory contributions, privately administered by pension administrators (AFP), built one of the region’s deepest capital markets and transformed Santiago, Chile’s capital, into a regional economic hub. Superb bonds were sought, IPOs abundant, and foreign investors as Chile as a model of modernity.
The prestige has since faded. Make self-financed replacement speeds — a median at 17% between 2015 and 2022-after workers dissatisfied. Distrust of AFPs often accused of charging high fees for intermediate returns have grown. Then came the pandemic when Chile’s Congress approved three extraordinary withdrawals. More than $ 50 billion drained between 2020 and 2021 – representing over 20% of individual pension funds accumulated in 2019 and sixteen percent of Chiles 2022 GDP. For households, this was a lifeline; For capital markets, a breach. Liquidity fell, the issue slowed down, and a pool of prolonged savings once considered sacrosanct, shrunken.
In March 2025, Congress approved a long -awaited pension reform and replaced the “Multifund” model with generational funds. Multifunds let workers choose from portfolios with varying risk, but many affiliated companies were poorly equipped, often chasing short -term returns or maintained in inconsistent breaches. The new generational funds use “Life Cyclus Investment.” Young savors are located in equity-heavy portfolios that gradually change against bonds as they grow older. Economists claim that this reduces errors and produces more stable results. Supervisors see it as common sense: Adjust portfolios with demographics rather than market timing.
The reform also adds employer contributions, increases the universal guaranteed pension, a state-funded benefit to guarantee minimum pension to older adults, regardless of whether they contributed consistently to the private AFP system. The reform also forces the competition by auctioning affiliated companies to the lowest geimrudenders every two years instead of four. These measures must lift the replacement speeds, put pressure on AFPs to reduce costs and improve efficiency and spread the risk more fairly.
Yet the reform remains careful. Generational funds make portfolios more rational, but saver more passive. Transparency is limited, changing providers cumbersome and commitment low. This conservatism risks leaving Chile’s pensions that are modern in shape, but analogously in spirit. All over the world, funding is changing rapidly. Digital wallets, open banking and tokenization transform how capital is raised and invested. Chile’s model, even with generational funds, can solve yesterday’s problems with yesterday’s tools.
The most promising innovation lies in tokenization: represents bonds or shares on digital headbooks. This promises faster settlement, lower costs and greater transparency without changing the underlying asset. Europe has launched its DLT pilot regime, and Switzerland’s six digital exchange is already emitting tokenized bonds. Chile is not sitting on his hands. By 2023, its Law on Innovation in Financial Technology created a regulated framework for open financing and cryptic companies. Officially launched by 2020, Santiago Stock Exchange (BCS), Central Securities Depository (DCV) and Telco GTD Auna Blockchain, Latin America’s first company blockchain -consortium, to test tokenized bonds and shares. If controlled gently, this shift could transform Chile into a regional hub for institutional cryptoinvesting and make initiatives such as Scalex Santiago Venture, Corfo and Start up Chile more dynamically by channeling digital savings for startups. Tokenization would not only lower costs and accelerate the settlement, but also increase transparency, improve liquidity through fractional ownership and expand market access. These features could cause pensions more secure exposure to innovation, while Chile’s financial infrastructure towards greater efficiency and global integration.
More controversial is crypto. Could Chile’s pension savings eventually include Bitcoin? Maybe, but not yet. In order for this to happen, the law must be changed to explicitly recognize digital assets as justified instruments for investing in pension savings. The country’s central bank must also approve them, and regulators must enforce standards for custody, valuation and risk. Even then, exposure would require caution. Direct coin stocks would merge with precautions. At a minimum, exposure should be through regulated ETFs or stocked notes (ETNs) with explicit legal recognition and strict caps. Other countries’ experiments with cryptoin investments show the effort. Germany lets certain pension vehicles invest up to 20 percent in crypto. New Zealand’s kiwisaver has deep in crypto via ETFs. Some US public funds have purchased Bitcoin products. But Canada’s Ontario teachers and Quebec’s CDPQ lost strongly in unsuccessful ventures such as FTX and Celsius. The lesson: Caution must prevail.
Chile could create a balance with a double path. Tokenized bonds and shares must be treated as equivalent with conventional if they are issued at regulated venues. In my opinion, crypto exposure, if allowed, should only come through ETFs or ETNs that were originally limited to 1% percent to understand the market, but should be allowed to reach at least 25% percent of the equity distribution. Licensed depot, separation of assets and insurance would be mandatory. Full detection of volatility and downward risks should be required so that savors know what is at stake. Such a roadmap would open pensions for innovation without jeopardizing stability. And by embedding tokenization in mainstream saving, it can speed up the digitization of Chile’s ecosystem for financial services, set standards, brokers and insurance companies that set standards, brokers and insurance companies.
But technical corrections alone cannot rebuild trust. Chile’s pension debate is about legitimacy as much as design. To tackle this, reforms could move on. Performance-based discounts could tie AFP fees to results, which rewards long-term better than better than better than. “Open pensions” platforms could mirror Open Bank and offer affiliated companies in real -time comparisons of fees and returns. Sandboxes could test tokenized fund shares and smart contracts. To allow a spread of savings to serve as mortgage security can facilitate tension between younger workers who feel locked out of housing markets and retirees who require higher pension softening of intermediate generation strains without undermining long-term financing while keeping the pension targets intact. Related companies should also share more directly in upward winnings. An idea would connect extraordinary profits to workers’ accounts: When returns struck a benchmark, the profits would be credited during supervision monitoring. This would make SAVERS partners in success and keep AFPs responsible for performance, not just scale.
Chile deserves credit for moving where its neighbors mostly Dawdle. Argentina is bound between state and private control. Brazil’s system is large, but fragmented. Mexico’s reforms remain disputed. Chile continues to adapt, however, gently. But the effort is high. Move too slowly and the capital markets are at risk of stagnation, starved by long -term savings. Move too fast and pensions could be caught in crypto storms. The balance between caution and innovation is delicate.
Generating agents make Chile’s pensions look slim on paper, adjust portfolios with demographics and reduce expensive errors. But without deeper innovation in technology, transparency and citizen engagement, the system can remain analogous to the heart. Pension design today is not just about adjusting contributions or fine -tuning commissions. It is about utilizing technology, protecting confidence and giving citizens an active role in designing their financial future. If Chile manages this balancing action, it could again set the regional standard. Performed properly, pensions could catalyze the modernization of the entire financial infrastructure. If not, Chile can find himself with a system that is modern in shape, but creaking downstairs, destined for another reform and another crisis of confidence.
