Pension Reform in Colombia, Two Proposals for Debate

The legislative reform on pensions is advancing in Colombia, with two proposals in the debate. On the one hand, the proposal defended by the government, which mainly advocates that most workers contribute their pensions in the public fund Colpensiones, and the alternative proposal formulated by the opposition, where the role of the public entity would be maintained in free competition with the private funds, in a system more similar to the one in force until now.

At this moment, the alternative proposal has more support, since the government’s proposal only has the votes of the parties that support the Executive in Congress, but there is a large number of congressmen who have not yet revealed what their position will be in the final vote. The measure needs at least 53 votes to be approved.

Currently, of the 7 million people of pensionable age in Colombia, only 2.3 million have a pension.

Two proposals in the debate

Unlike other reform proposals that, as in the Health sector, were shelved due to lack of support, the Pension reform is guaranteed to be successful. However, an alternative to the government’s proposal has emerged, defended by the conservative opposition, which, for the time being, has a better chance of winning the vote.

The differences between the two models are mainly related to the role of the public fund Colpensiones and the benefit for people who do not reach the minimum pensionable income. In this sense, the government’s proposal seeks to ensure that all workers earning up to three minimum wages contribute to the public fund. For the rest, the excess contribution could be linked to the public entity or any of the existing private funds. The opposition proposes that only those who earn between 1 and 1.5 minimum wages are obliged to contribute to the public fund.

The ongoing pension reform discussion in Colombia highlights a third critical distinction concerning support for individuals who reach retirement age without the requisite contributions. This aspect, known as the “semi-contributory pillar,” is designed to provide income to those who have contributed to their pensions but haven’t met the necessary threshold for retirement. Here, the alternative proposal suggests lowering the eligibility age for this support to 62 years for men and 57 for women. On the other hand, the government’s stance sets the age at 65 for men and 62 for women.

Despite these differences in approaching pension contributions and management, neither proposal suggests changing the retirement age. It is proposed to stay the same: 57 years for women and 62 years for men. This aspect of the pension reform debate highlights the efforts to adapt Colombia’s pension system to better meet the needs of its aging population while maintaining the current retirement age benchmarks.

More pensioners in Colombia

The objective of both proposals is that more Colombians of pensionable age have access to a pension. In this sense, there would be three types of pensioners: those in the contributory regime, i.e., those who have contributed for the legal period and will be able to receive a pension when they reach the legal age; those in the semi-contributory regime, i.e., those who reach the legal age and do not have the total time required to receive a normal pension; and those who access the “solidarity pillar”, i.e., the older people who are in a situation of extreme poverty. For the latter group, the reform provides for the delivery of minimum benefits. It is estimated that there would be around two million people in this group.

For the senator of the U Party, Norma Hurtado, who defends the alternative proposal to the government, hers “is a model that respects the architecture of pillars, but does not jeopardize long-term financial stability”.

In this sense, the economic viability of the pension model has also been subject to debate. On the one hand, the demographic change in the country is established as of 2051, when Colombia will decrease in population, with an evident aging of its inhabitants. There will be fewer and fewer contributing workers for older pensioners.

Likewise, the speakers state that formal employment must be promoted, to the detriment of Colombia’s rampant labor informality, to guarantee the pension system.