If you work in Chile and pay into an AFP, the way your retirement savings are invested is about to change more than it has in over two decades. Starting in April 2027, the five multifondos you know today - types A, B, C, D and E - will disappear for your mandatory savings, replaced by ten age-based generational funds. You will no longer pick your own risk level. The system will assign you a fund by your year of birth, and that fund will gradually get more conservative as you approach retirement.
The multifondos were born in 2002, and the original idea was to let workers take an active role in their own pension savings. In practice, many people jumped between funds at the wrong moments - chasing returns after a rally or fleeing to safety after a crash - and locked in losses that hurt their final pension. The 2025 pension reform, Law 21.735, set out to fix that by removing the guesswork. Instead of asking you to be your own portfolio manager, the new model applies a well-established investing idea: take more risk when you are young and have decades to recover, and dial it down as retirement nears.
This is essentially a life-cycle strategy - what the regulator calls a glide path. Your asset allocation shifts automatically over time, from growth assets like equities toward preservation assets like fixed income, without you lifting a finger.
How the ten generational funds work
Under the proposal published by the Superintendencia de Pensiones, there will be ten funds instead of five. Everyone is slotted into one based on their year of birth. There is one initial fund grouping all workers up to age 35, eight intermediate funds covering five-year age cohorts above 35, and a final consolidation fund for people over 75. Younger cohorts hold more equities to chase long-term growth; older cohorts hold more fixed income to protect what has already been accumulated.
The key difference from the multifondos is that you no longer choose, and you cannot switch funds. Your mandatory savings stay in the generational fund tied to your birth year, and the fund itself changes its investment mix over the years. If you disagree with how your AFP is running things, your only lever is to change AFP - not to change fund.
What you lose, and what you gain
The obvious loss is control. If you were the kind of saver who deliberately stayed in Fund A for maximum equity exposure, or moved to Fund E to sit tight before retirement, that manual choice goes away for your mandatory contributions. For a minority of engaged, financially literate savers, that is a real constraint.
The gain is protection from your own worst instincts and from being caught over-exposed at the wrong moment. A market crash the year before you retire can permanently dent your pension; the glide path is designed to have already reduced your risk by then. Historically, disciplined life-cycle allocation has tended to produce steadier outcomes than reactive fund-switching, though no pension strategy removes market risk entirely and returns are never guaranteed.
Your voluntary savings keep their freedom. The automatic, age-based assignment applies only to your mandatory contributions. For voluntary pension savings (APV) you can still choose whichever generational fund you prefer, regardless of your age.
The reward-and-penalty rule for AFPs
To keep managers honest, the reform introduces reference portfolios - a benchmark for each generational fund, measured over a rolling 36-month window. If an AFP beats its benchmark by more than a defined margin, it can charge an extra performance fee, deducted from the fund. If it falls short of the lower margin, it must put its own money into the fund to compensate savers. In plain terms: beat the benchmark and get paid; lag it and pay up.
The regulator published its proposed investment rules for consultation and set a deadline for public comments at the end of July 2026. Under Law 21.735, the final investment regime must be published by 1 September 2026, and the switch from multifondos to generational funds happens in April 2027. Each AFP must report its initial strategic allocation by 1 March 2027, a month before the new scheme goes live. To smooth the migration, the early years allow wide deviation bands around the reference portfolios so portfolios can adjust gradually.
There is no urgent action required, but a few things are worth doing. Check which AFP you are in and compare commissions - since October 2025, AFP Uno has charged the lowest commission at 0.46% of taxable income, and switching AFP will remain your main lever under the new system. Understand which cohort you will land in based on your birth year, so the fund's risk level does not surprise you. And if you use voluntary savings (APV), remember you keep full freedom to choose your fund there. Beyond that, the reform is designed so you can largely leave your mandatory savings alone - which is rather the point.
