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Senior Associate
The Chilean pension regulator (Superintendencia de Pensiones – SP) has awarded the public tender for consulting services to Mercer Consulting (Chile) Ltd. (Mercer). This consultancy will define the core elements of the new Pension Fund Investment Regime, as part of the recently enacted Pension Reform Law 21,735 (Reform).
Objectives and scope of the consultancy
The awarded service is crucial for building the new regulatory framework and involves developing detailed technical proposals for the following components, which are considered unprecedented in the regulation of Chilean pension fund investments:
- Development of Target Date Funds (TDFs): A new lifecycle scheme that will replace the current multi-fund system, automatically adjusting the risk exposure of plan participant’s savings as they approach retirement age.
- Definition of Benchmarks: Benchmarks will be established to serve as an objective standard for evaluating the performance the TDFs of each pension fund manager (AFP).
- Design of an incentive structure: A system of rewards and penalties will be created based on the relative performance of the TDFs against their benchmarks, in order to align the interests of the AFPs with those of the plan participants and improve efficiency.
Next steps in the development of the Reform
The awarding of this consultancy marks a step forward in the implementation of the Reform. According to the legal timeline, the next milestones are:
- September 1, 2026: Deadline for the publication of the new Investment Regime for TDFs.
- April 1, 2027: Go live date of the TDFs to which the assets in the current A, B, C, D, and E type pension funds must be transferred.
- A 36-month transition period is planned, starting in April 2027, to allow for a gradual and orderly adjustment of investment portfolios.
For information on the next steps in the development of the Reform and its consequences for the Chilean pension system, please continuously visit the following link: https://alessandri.legal/en/news/
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