Pension reform would remove 70% of the current resources from the AFPs

One of the proposals that the government of Gustavo Petro seeks to advance is that of Colombian pension system. The objective of this is to guarantee that more Colombians have access to a pension and that those who do not meet the requirements for it can have solidarity allowances.

(Read: Expert alerts on the March reform package).

The reform contemplates that workers who earn up to three minimum wages carry out their contributions in the public system and those who exceed this standard do it privately.

However, according to Davivienda Corredores, 47.5% of the members of pension funds have an income of one minimum wage. 40.9% are workers between 1 and 2 minimum wages while 5.4% have salaries of between 2 and 3 minimum wages.

only the 6.2% of affiliates are employees with higher salaries. Likewise, the report states that there are 25.5 million affiliates but only 10.15 million are contributors: 30% of a minimum wage, 48.5% of up to two minimum wages and 9.9% of up to three minimum wages. The remaining 11.6% have higher incomes.

(In addition: The contributions to the Solidarity Fund raised in the pension reform).

Along with this, the firm reports that 78% of the real contributions come from workers between 2 and 3 minimum wages and 22% of those with higher incomes.

The government’s proposal It states that 19.1% of the contributions will go to the AFPs and the rest to Colpensiones. In addition, about 25.3% will go to the savings fund. This implies that $26.6 billion will go to Colpensiones and of these, $8.3 billion will go to the savings fund.

By contrast, $6.2 billion will go to the AFPs, which under the current regime have around $20.3 billion.

Davivienda Corredores also states that if the minimum required to contribute to Colpensiones were 2 minimum wages, private funds would have $9.4 billion left. In case of being 1.5 minimum wage, it would correspond to $12.1 billion and if it were one, like has requested the union of the AFPs, it would be $17 billion.

(See: ‘The pension reform is a kind of disguised tax reform’).

Until now, the discussion has not started in Congress, but the minimum contribution to Colpensiones will be one of the key points, since it directly impacts the income of the AFPs and their investment capacity in the capital market.

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