Effects of an Eventual Upcoming Withdrawal of Pension Funds

Abstract

The three withdrawals from pension funds injected almost US$ 50.000 billion into the market bringing with them inflationary pressures in the short and medium term, a decision that was harmful to people and companies. On the economic side, more than half of domestic inflation is due to the three withdrawals, decreasing the value of people´s money and increase the interest rates. On the pension side, eleven million people managed to withdraw their money and almost four million people were left without their funds. For women a drop of 33% in the amount of the future pension and for men a 24% on average. And on the financial side, a destruction of the capital market causing a significant drop in assets prices and companies to stop investing in big projects in Chile. During 2023, a new project was carried out on a new withdrawal of pension funds but it the form of a self-loan, a benefit that would have between one million and ten million Chilean pesos saved in their accounts to withdraw up to one million Chilean pesos. The purpose of this work is to see the effects of a possible fourth withdrawal from pension funds. And we conclude that an upcoming retirement has three consequences. In the economic sense, it would bring with another increase in the monetary base, which in turn translates into an increase in inflation. In the sense of pensions, more than three million people would again run out of funds and would cause a potential additional 16% drop in the amounts of future pension affecting the current saving of contributors. Finally, in the financial sense, the capital markets would be destroyed, causing a significant drop in assets prices and companies to stop investing in big projects in Chile.