Petro’s pension reform: these are the cards that he has already uncovered

With President Gustavo Petro’s proposal that part of the contributions from members of private pension funds finance the subsidies that the Government expects to pay three million older adults without a pension, Analysts and academics came out to give their opinion about the positive and negative points of what is expected to be the basis of the current administration’s pension reform.

(Read: Pension reform: bond for adults would go from $80,000 to $500,000).

The Colombian president said Tuesday night that he will draw resources from private pension funds to give $500,000 pesos a month to older adults who do not have a pension and that under the Colombia Mayor program, today 1.6 million people receive $80,000 a month.

Yesterday he assured that the part of the contribution that enters Colpensiones will confer on its salaried owner the right to a pension and then mentioned that the allowances for older adults, today without a pension, are paid from the national budget, which will acquire a capacity of up to $18 billion annually for this purpose, because private fund contributors will enter Colpensiones up to a percentage of their contribution.

Faced with the President’s statements, Asofondos, the union that represents the pension fund management companies, recalled that a few days ago a meeting was held with the Ministry of Labor, in order to seek a technical dialogue table as a natural setting to analyze and discuss a pension reform proposal that would allow more Colombians have protection in their old age and guarantee equity in the targeting of resources, and that it be financially sustainable.

(See: Regional Dialogues, the Government’s plan to meet needs).

“With Minister Gloria Ramírez we had a first meeting a few days ago in which the parties agreed to maintain a channel of dialogue and through technical tables to analyze the best alternatives for a reform as transcendental as the pension reform”, pointed out Santiago Montenegro, president of Asofondos (association that brings together Colfondos, Porvenir, Protección, and Skandia).

Although the leader sees the initiative to strengthen old-age protection mechanisms for three million older adults as positive, he insists that this type of proposal must be framed under a reform that allows improvements to be incorporated into the pension system, “all this is necessary, but without affecting people’s savings, nor the possibility that when they reach old age, current workers will not have the necessary resources to retire”.

(See: The reforms of the Petro Government to Social Prosperity and the ICBF).

Montenegro also highlighted that in nearly 30 years, the pension savings in private funds accumulated in that period (today about $360 billion), not only constitutes the main guarantor of workers for their old age, but also an important asset for the development of the countrythe resources of pension funds have contributed each year about 0.6% of the Gross Domestic Product through investments that have irrigated the economic and productive sectors of the country“, that’s why insists that you have to take care of saving, and not overspend spending through savings owned by workers, hence the importance of reiterating the opening of a space for dialogue with the Government to reach an agreement that is sustainable for the system, its beneficiaries and savers.

The four AFPs have 18.4 million affiliates, with an average age of 35 years and a first group of pensioners of just over 268,000.

about the workers, 8 out of 10 earn between 1 and 2 minimum wages, more than 10 million earn less than 1 minimum wage. Likewise, upon reaching pension age, on average a worker in Colombia has contributed 500 weeks (for a pension in an AFP they ask for 1,150 weeks and in Colpensiones 1,300).

Mario Cruz, director of Social Security and Life of Fasecolda, says that heo positive is that coverage is improved in old age and it is something that must be defended because 70% of grandparents live without protection.

(Also: Colombia, among the worst countries to retire, according to ‘ranking’).

But he warned that the difference is how that program will be financed and sustainability implies a fiscal effort that guarantees spending.

“The Government must respect the savings that workers have built for years. It is a bad idea the way of financing as proposedCruz said.

He said that in white money $18 billion a year has to be withdrawn and, more or less, only in this generation of older adults, for 30 years, “should be insured a little more than $500 billion”.

Cruz assures that the Government wants to avoid the fiscal cost of assuming spending and that is why he proposes that, although he clarified that the details of the reform remain to be seen.

Andrés Felipe Izquierdo, from Integral Pension Solutions, says that the State does not know how to finance coverage for old age; so you should present the proposal in the tax reform to find that financing via taxes or implement a system of pillars that redirects the flow of contribution contributions that are paid today in the system to release the resources that the Nation transfers to Colpensiones.

(Keep reading: One in ten older adults has chosen to undertake in the country).

He considers that the priority should be the creation of the zero or non-contributory pillar, for people who did not get a pension (in line with Petro’s proposal), but the source of financing cannot be current savings. Later, reform the general system (Colpensiones and funds) to eliminate competition between schemes, among others.

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