FILE PHOTO: Chile's President Michelle Bachelet speaks during a meeting with her cabinet at the presidential palace of Cerro Castillo in Vina del Mar, Chile March 24, 2017. REUTERS/Rodrigo Garrido(reuters_tickers)
SANTIAGO (Reuters) - Chilean President Michelle Bachelet announced on Wednesday evening that she was sending to Congress a bill that would dramatically increase the size of public pensions in the face of growing opposition to the nation's current system.
The bill would include an increase in the amount of savings held collectively, a new 5 percent payroll tax, and a corresponding boost in retirement savings. Current pensioners would see savings rise by around 20 percent, while workers currently paying into the system would see increases of up to 50 percent.
"We must advance towards a truly mixed social security system, where all play their part, where solidarity comes from personal effort, where the state and employers play their corresponding role," Bachelet said in a speech.
Chile's privatised pension plan was started in the 1980s during the dictatorship of Augusto Pinochet, and the so-called 'Chilean model' has been copied and adopted worldwide.
But opposition to it is rising in Chile, with regular street protests demanding changes. Opponents say the payouts are meagre, and they complain the pensions are managed by for-profit funds.
It is unclear if Bachelet's bill can become law. Her governing coalition is severely divided, and parliamentary elections are set to take place in November, while debate on complex bills can take years in Chile.
Earlier in April, Chile's finance minister said divisions in the government might make any pension reform impossible, and earlier this week, a major education bill pushed by Bachelet failed in committee.
Under the system proposed by Bachelet, the new 5 percent tax would be divided into two parts and have a six-year implementation period. Three percent would go into the personal savings of each worker, while 2 percent would go into a collective account, managed by the state.
The bill would also give pensioners more say in the investment decisions of the pension investment funds, known as AFPs.
(This story has been refiled to remove duplicate paragraphs.)
(Reporting by Gram Slattery and Antonio de la Jara; Editing by Bernadette Baum)