Without the pension reform project that the National Government plans to process in the course of 2023 having been officially presented, and while waiting for more details of the initiative to be known, there are already questions about the possible changes that would be included therein.
(Points on which the Ministry of Finance disagrees with the pension reform).
According to International Federation of Pension Fund Administrators (Fiap), the proposal go against the recommendations made in the ‘World pension index Mercer CFA 2022: Orientation of the pension systems in the world’, since the changes that are analyzed there imply a risk on the financial sustainability of the pension system.
“In Colombia, it is discussed diverting contributions from the individual savings system to the pay-as-you-go system. These proposals go against the recommendations made by the Mercer report and, in addition, due to demographic trends, they imply a risk on the financial sustainability of the systems”specifies the Fiap.
Referring in particular to what is known so far about the pension initiative that would be carried out in Colombia, the union adds that there would be “negative consequences such as an increase in the fiscal deficit and the pension system, which would take the pension debt from less than one hundred percent to more than 200 percent, according to calculations by the Universidad de los Andes; negative effects on growth and the economy, and a weakening of the capital market”.
(What Petro thinks about raising the pension age in Colombia).
Part of what has come out about the initiative, which will be presented to the Legislature in February of this year, according to what the Government has said, indicates that a good part of the contributions of private funds will be diverted to Colpensiones. The totality of the contributions of those who earn between one and 4 minimum wages would go to said state entity, while the other people would contribute for an amount of 4 minimum wages to Colpensiones and the difference, to individual savings.
The resources collected by Colpensiones would be used in the contributory distribution system (median premium regime) and to strengthen the basic solidarity pillar (Colombia Mayor).
Although the proposal would strengthen the solidarity pillar, it fails in other crucial aspects that would help consolidate the country’s pension system and that are part of the recommendations of the study in question.
(Pension reform proposal would generate more pressure on finances: Anif).
For example, Fiap warns that the country needs to increase the minimum level of support for the poorest elderly people, household savings and the level of coverage, to gradually increase assets. It is also required to gradually increase the state retirement age and introduce agreements to protect the interests with respect to the pensions of both parties in a divorce.
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