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SANTIAGO, June 16 (Reuters) - Chile's socialist President Michelle Bachelet made good on another of her campaign promises on Monday, signing a bill to create a state-run pension fund as an alternative to the country's private pension funds, known as AFPs.
The state-run fund will look to increase competition in the market and incorporate Chileans who aren't a priority for the AFPs, such as independent workers, those with lower salaries, or those that work in isolated areas.
"We're aiming for improvements that in the medium and long term will guarantee a dignified old-age," said Bachelet, who took power in March for her second non-consecutive term.
Of the total 9.6 million workers eligible to save money with the private pensions, only 5 million do so periodically.
"AFPs will have to work hard to reduce their administration costs, improve the quality of their service and increase benefits for members," said Bachelet, at the bill-signing ceremony at the Moneda presidential palace.
There was no immediate comment on Monday from Chile's largest private pension funds.
Since taking office, Bachelet has been on a heavy reform drive, much of which is centered on shrinking Chile's wealth inequalities, which are the worst among the Organization for Economic Co-operation and Development's 34 member states based on income distribution.
Chile's AFPs held $168 billion in assets at the end of May. (Reporting by Anthony Esposito)