Juan David Correa, president of the pension and severance fund administrator Protección, says that the pension reform is not what the industry wanted, but there are interesting elements to work on and announced that the entity is advising members to explain the advantages of staying and also, to save in voluntary pensions.
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How did you feel about the reform?
A pension reform has been needed for some time now and we have one in our hands that is not what we would have wanted. We were looking for a solution to provide greater coverage because today there are not enough people who retire and the one that was approved applies to the formal economy and not the informal one, which is already 60%. The other thing is that the reform should be fiscally sustainable, but it has a high cost and the pension debt will be greater.
There are important things, such as unifying the system, stopping the two systems from competing with the pillars, cutting subsidies for the highest earners, who received 80% of the subsidies, and there are other positive elements for women.
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What should be done now?
Let the regulations be the best way to implement them. One thing that remains in force is that life expectancy is increasing and there are pending demographic issues and also something key: savings. The conversation is about savings.
And what are you going to do?
For Protección, the reform is a space for adaptation. We want to provide financial well-being with retirement from work and many other things, such as a platform to support mandatory savings, voluntary savings and investment.
What are the bad things about the reform?
We wanted a reform focused on savings. The reform establishes a high threshold. More than 80% of Colombians earn up to 2.3 minimum wages, which will imply a high fiscal responsibility. It would have been desirable to have a minimum wage so that it would be fiscally sustainable and to have a savings scheme for Colombians. Another element is the capital market. The flow that currently runs through the system helps the growth and development of the country through the placement of infrastructure or real estate securities.
The flow that will now run will be reduced by 80% of the collection that was there. Of every $100 saved in the system, $30 will be transferred to the fund and $70 to Colpensiones to pay pensions with the reform. A broad regulation must be issued…
This is a key point. More than 40% of the reform requires regulations to implement the technological and operational processes and with that July 1, 2025, so that Colpensiones is prepared for its entry into force. We will be focused on implementing the reform.
What challenges does Protection face?
Initially, pedagogy and education. What we have been doing is constantly communicating with clients about the products we create, but also with Colombians. We receive questions every day. We developed the Pension Profiler, which allows each Colombian, with their questions, to be answered in light of the reform. We have received 350,000 queries and have delivered 100,000 answers. There are teams working to ensure that the technology is ready because the processes must be adapted. This work is with all the actors in the system with whom the regulation will be made and our responsibility is to respond quickly.
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What should people do?
Colombians should not act hastily when making a decision about what is best for them, based on the reform. They should not resort to intermediaries and we will provide them with the best options. Before moving, it is necessary to look at their work history and understand the options. There are two years to make a decision.
With the reform, how many will be able to leave?
80% of Colombians earn up to 2.3 times the minimum wage. There is a responsibility to clients and their resources, not only to affiliated clients, but to the more than 110,000 Protección pensioners who must continue to be served. Although a large part of the resources will go to the new system, our clients will have opportunities for growth.
How will voluntary pensions be strengthened?
This is the conversation about the future. Today, in voluntary savings, we have 40% of the market compared to the other three AFPs. And 9% of voluntary savings compared to other actors that offer this option in the country, such as trustees, commission agents or some banks.
We provide our clients with a portfolio of various assets that allow them to build their savings and that is a great help in supplementing their pension, which can also be built with very low amounts.
HOLMAN RODRIGUEZ MARTINEZ
Portfolio Journalist
