According to the recent development in Chile, the new constitutional reform will allow you to access a maximum of 10% of your AFP funds. The statute will be published as law in the official newspaper (“Diario Official”) by Wednesday 29th or Thursday 30th of July, 2020. As soon as the publication takes place, the same day it will become law and you can immediately submit your individual request online to your associated AFP.
EBG and MEFE have gathered the key information for you and summarized the important points below:
1) Funds can be withdrawn tax-free, and without cost. You are able to access 10% of your AFP pension fund (up to a maximum of 150 UF, the minimum amount is 35 UF). According to the value of the UF on Tuesday 28th of July 2020, this equates to a minimum of $1 million up to a maximum of $4.3 million Chilean pesos.
If your current total funds accumulated is less than 35 UF, you can access the full value of your AFP fund.
Here is a link to the new law: ley_21248.
2) Anyone who currently pays and/or has paid into the Chilean AFP system is entitled to access their pension fund.
This includes foreigners with pending visa status, people already in retirement and people who have already left the country. Our current understanding is that making this 10% withdrawal does not impact a subsequent full fund retrieval under the Chilean law 18.156 for professional technical foreigners (assuming the fulfillment of the requirements – information here). There is no mention of an impact on law 18.156 in the new law**
3) From the point of publication in the “Diario Official”, the request can be submitted online at your AFP (apparently from Thursday 30th of July 2020 onwards). According to law 21.248 you have 365 days to access your money (until 30/7/2021). From Monday 2nd of August 2020 onwards you can also submit your request by phone or in person at your associated AFP office (due to Covid-Situation, we recommend you use the online option).
4) Total payout will take place within 40 working days, divided into two partial payments (each maximum of 75 UF). If your total AFP balance is less than 35 UF, you will receive your money in one transfer. The timing for the first payment is 5 to 10 working days after your initial request. The second payment will take place at a maximum of 30 working days after the first payment.
5) Please be aware that the 10% AFP withdrawal is a once only request. If you ask for less than the maximum, you cannot access the remaining percentage later on under the same conditions (untaxed, zero cost). We believe that the form may be a bit misleading and so if you would like to make a maximum withdrawal – make this very clear by entering 100%.
6) The process is free of charge and does not require any intermediary. You only need your Chilean ID (RUT/Carnet) and its serial number to start the request.
No online key or password is needed to start the request. In any case it is recommended that you check your total AFP balance yourself before you begin the process.
Be aware of people (scammers) who offer to deal with this process in your name. Never trust someone or hand over your personal access information by phone. This can easily be done by yourself. You should also expect huge online traffic and maybe breakdowns at the AFP websites as the companies have to prepare for the traffic increase with very short notice.
EBG Opinion: If you are a foreign national that would be keen to extract your whole AFP fund at some stage – it appears to make sense to withdraw the 10% of your fund now, even if you are not under financial pressure. As far as we can see, there is nothing in the provisions of this new law that would preclude a future full withdrawal**. We know that withdrawals are ever more challenging so getting 10% back now is a positive first step.
These savings were built to help provide security in your financial future and so you should consider carefully what you do with the money. You could clear high interest credit card debt or loans, add to your “emergency fund” savings or place them in a more relevant long terms savings or investment account.
As a foreign person living in Chile you have the option elect to make your pension contributions to a more flexible international pension. It could be a great opportunity to review your overall financial planning and where the Chilean AFP sits within that. This article we wrote earlier in the year gives further information on the options available to foreign people living in Chile:
If you would like professional help on this topic or in building your own personalised financial plan then please complete the below form to request a consultation.
The question is a bit trickier for Chilean nationals. If you need this money to support yourself and your family through difficult times, you should of course access funds for that purpose. If not, you should very carefully consider why you are making a withdrawal that could diminish your long term pension planning.
If your earnings sit within the higher tax brackets then there is an argument to withdraw the funds and then replace them into the pension system with tax relief, via an APV contribution for example. You may also wish to clear short term, high interest loans, or credit and store cards to allow yourself room to make a proper long term plan. You must first ask yourself – am I disciplined enough to use this money in such a way, or will I choose to spend it on non-essential items?
In any of the above situations – this money is yours and so is the choice. Before making a long term financial decision just be certain to consider why you are making the withdrawal. Our article on financial behaviour may be a great thing to read before taking the next step.
Next steps (how to prepare for the 10% retrieval)
➢ Check online which AFP you are associated with this link.
➢ Get your RUT-Card (as you need the serial number) or NIC (número de identificación para Cotización) which is the temporary number assigned by the AFP until your RUT-Card is issued
➢ Choose the payment method: preferentially into your bank account in Chile or by cheque (“vale vista” that you cash at Sencillito/Servipag). You can also choose to have the funds paid into your secondary (Cuenta 2) investment account at your AFP (the amount will be exempt from their commission/fee) or to the “Caja de compensación” in Chile.
➢ The online form needs some personal information such as your phone number, address and email.
➢ You should receive official notice (by phone/email) from your AFP about the amount payable and status of your request within 3 working days of submission