Can Jeannette Jara place your private retirement savings in the hands of the State and keep the excess?

Ricardo Gurgel
22 de nov.
4 min de leitura

The concern expressed by economic sectors, analysts, and even part of the Chilean electorate emerged when Jeannette Jara’s candidacy was still strongly aligned with the historical line of the Communist Party.

Below, I explain clearly, technically, and directly how the elimination of the AFPs, the creation of a 100% state-run system and the end of individual accounts could, in practice, open the door to state control over private retirement savings — and even, in extreme scenarios, to something that may be interpreted as expropriation of excess pension savings.

1. How the system works today (and why it matters)

Chile currently has:

private pension funds (AFPs)
individual accounts, where:
- the money formally belongs to the worker
- the State regulates but cannot use that money
- more than US$ 170 billion are privately managed

These resources are not public budget — they are private property.

2. If the private system were eliminated (as Jara originally advocated), what would happen legally?

The logical sequence would be:

Step 1 — Legal extinction of the AFPs

The companies cease operating and must transfer their assets.

Step 2 — Closure of private individual accounts

The individual account ceases to exist as a property mechanism.

Step 3 — Transfer of funds to the State

Even if labeled “collective fund,” “solidarity fund,” or “public pillar,” the effect is:

The money becomes administered by the State, not by its owner.

Step 4 — Conversion of private assets into collective assets

The worker loses full ownership rights over their accumulated retirement savings.

This opens the door to what several economists call: Nationalization of long-term retirement savings.

3. How does this allow the State to control investment returns?

If the State becomes the sole administrator:

3.1. It decides where to invest

government bonds
state-run projects
infrastructure works
strategic state companies
sovereign funds

Meaning: workers begin financing the government, voluntarily or not.

3.2. It determines the investment return

In the current system, returns follow the market.In a state-run system:

returns may be lower
they may be politically manipulated
they may finance current public spending
they may be directed toward the ruling party’s projects

3.3. It controls access and liquidity

The State may set:

retirement age
withdrawal limits
transfer rules
mandatory contributions

In other words: total control.

4. What about the risk of “expropriating excess savings”?

This is the most sensitive point.

If the State eliminates private accounts and creates a single collective fund:

4.1. Any surplus above the defined pension is absorbed into the collective pool

If one worker saved much more than another, that extra amount is redistributed.

This has even been described by Communist Party sectors as:

“Forced intergenerational solidarity.”

In practice:the excess of your savings is no longer yours.

4.2. The State may use the fund to reduce fiscal deficits

This has already happened in countries that nationalized pensions:

Argentina (2008)
Bolivia (2010)
Hungary (2011)

The sequence was identical:

Private accounts eliminated
Assets transferred to the State
Funds used to finance public debt
Pensions become dependent on government budget

4.3. “Excess savings” can be reclassified as “solidarity surplus”

Meaning any amount above the state-defined minimum pension may be:

redistributed
centralized
absorbed through solidarity rules

The worker loses control over their own savings.

5. Would this be technically considered expropriation?

Legally:

It would be labeled structural reform or “solidarity redistribution.”

Economically:

Yes — it is indirect or undeclared expropriation, because:

The State gains control and decision-making authority over funds that previously belonged to individuals.

No explicit confiscation occurs, but the economic effect is identical.

6. What was Jara’s original position?

In pre-moderation documents and speeches, Jara supported:

“Ending the AFPs for ethical and sovereignty reasons.”
“100% collective accounts.”
“Eliminating retirement savings based on individual property.”
“A single, state-run solidarity fund.”

This model is exactly what enables:

total state control
loss of individual property
potential political use of pension funds
absorption of excess savings

This is why financial sectors and part of the public interpreted the proposal as a nationalization of private retirement savings.

Simulation: What would happen to a worker with 30 years of contributions?

Assume:

average salary: 1,100,000 CLP/month
mandatory contribution: 10%
30 working years
historical AFP return: 6% annually

Estimated accumulated savings: ≈ 138 million CLP (≈ USD 150,000).

Scenario 1 — Current AFP system

full ownership of the fund
inheritance allowed
partial withdrawals possible
worker controls their account

Estimated pension: ~620,000 CLP/month

Scenario 2 — State-run single fund (original Jara/PC model)

1. The fund stops belonging to the worker

Transferred to the Single State Solidarity Fund.

2. No inheritance

The balance becomes collective.

3. “Surpluses” are redistributed

In this example: ≈ 60 million CLP redistributed to others.

State-defined pension: 300,000–350,000 CLP/month

A 45%–52% reduction compared to AFP returns.

What happens to the worker’s 138 million CLP?

40% for minimum pension supplements
35% for low- or non-contributors
25% for system administration and deficit coverage

In practice

The worker loses:

property rights over savings
market-based returns
inheritance rights
withdrawal flexibility
proportional benefits based on effort

The State gains:

control over the country’s largest financial fund
liquidity for public spending
capital for government projects
power to adjust benefits unilaterally

Item	Current System (AFPs)	State System (PC/Jara original)
Fund ownership	Private	State-owned
Balance after 30 years	~138 million CLP	0 (transferred to the State)
Estimated monthly income	~620,000 CLP	300,000–350,000 CLP
Inheritance	Yes	No
Partial withdrawals	Possible	No
Return on investment	Market-based (6% per year)	Determined by the government
Risk of indirect expropriation	None	High

If Jara had implemented the original Communist Party program, the Chilean State would have gained direct control over all individual retirement savings and could redistribute, use, or retain any surplus based on political criteria.

For this analysis, the main sources were: