This is how the pension reform looked as it passed through the Senate

This is how the pension reform looked as it passed through the Senate
This is how the pension reform looked as it passed through the Senate

The Minister of Labor, Gloria Inés Ramírez, during the approval of the pension reform in the Senate.

Photo: Gustavo Torrijos

President Gustavo Petro’s pension reform obtained its greatest boost so far this Tuesday, when it was approved by the plenary session of the Senate. This implies that the initiative has already passed two of the four debates it must have to become law.

Although it is a victory for the Government, the project must still go through the same process in the House of Representatives: discussion in committee (the seventh) and plenary. And everything must happen before June 20 (this without taking into account the extra sessions of Congress) or the reform would end up sinking.

However, the process in the Chamber, it is expected, should be somewhat more agile. The reform was filed on March 22 of last year, was presented almost two months later (end of May) and was approved in the Seventh Commission of the Senate in mid-June 2023.

The discussion in the plenary Senate took four sessions to approve the articles, after more than five debates in which negative and alternative proposals were discarded, as well as a series of impediments, among other issues.

In other words: the reform has a narrow time frame to become a reality.

During this Tuesday’s discussion, a new article was included on differential treatment for indigenous peoples, black, Afro-Colombian, Raizal, Palanquera and peasant communities. All specific mentions of a number of years or weeks that are required as a requirement for a benefit must be adjusted downward for these communities, considering the lower life expectancy.

The contribution threshold in Colpensiones (which went from three minimum salaries to 2.3 salaries), the administration of the savings fund (which will be in the hands of the Banco de la República and not Colpensiones) and the validity of the project (which will now be July 2025) were the highest points of this discussion, which was marked by the disagreements between the Historical Pact and the opposition and by the strategies to try to disarm the quorum until the last minute.

How was the reform as it passed through the Senate?

The proposal includes a four-pillar system (solidarity, semi-contributuvo, contributory and voluntary savings) that seeks to end competition between Colpensiones and the Pension Fund Administrators (AFP). In general, the Senate plenary maintained the architecture proposed in the official presentation, but with some changes, most of them endorsed by the Government.

In the solidarity pillar, which contemplates a basic income that will correspond at least to the extreme poverty line (about $223,000), older people in poverty who cannot obtain a pension will enter (at 65 years of age for men and at 60 years for women). The Senate included in this pillar women over 50 years of age and men over 55 years of age with disabilities, who have a loss of work capacity equal to or greater than 50% and who do not have resources; caregivers of people with disabilities who do not have income due to their work; belonging to black, Afro-Colombian, Raizal and Palenquero peoples and to peasant communities that meet certain criteria.

The semi-contributory pillar would benefit people (in the same age ranges as the solidarity person) who contributed between 300 and less than 1,000 weeks. In the current system, those who do not meet the week requirements are returned what they contributed (in the case of Colpensiones, without interest), but with the reform that money would become a life annuity. The Senate plenary changed the formula to calculate the income of those who are not beneficiaries of the solidarity pillar, going from a 15% subsidy to 20% for men and 30% for women.

The most critical point of the discussion, and the one that the Government had to agree to have the votes of the Liberal Party and La U, was the threshold of the contributory pillar. The presentation established that all members would contribute up to three minimum wages to Colpensiones and from then on to one of the private funds, a controversial proposal because according to experts and unions this is not sustainable in the long term.

Although many analysts recommended lowering the threshold to one or 1.5 minimum salaries, a threshold of 2.3 salaries was finally approved in the Senate.

The savings fund

The plenary session made a fundamental change in the savings fund for the contributory pillar created by the reform, key to the sustainability of the system, as it will save and invest the contributions. Initially, the Government proposed that Colpensiones manage the fund, but the technical capabilities, governance and independence of the entity to assume such a function were questioned.

The Senate included a new article that specifies the characteristics and functions of the new fund, which will now be in the hands of the Bank of the Republic. This is the most agreed upon point of the reform because it had the signature of all political parties.

The fund will have a steering committee made up of the Minister of Finance, the Minister of Labor, the director of the National Planning Department, four experts selected by the board of directors of the Bank of the Republic (each one will have a period of five years and may be re-elected once) and by the president of Colpensiones who will have a voice, but not a vote. This committee will be in charge of approving, among other things, the resource administration policy.

Senator Angélica Lozano, from Alianza Verde, explained that the senators analyzed the institutional design of Colpensiones, Fiduprevisora ​​and the National Savings Fund and finally opted for the Bank of the Republic. Faced with doubts about the constitutionality of this mechanism, she maintained that there are three laws that have created funds managed by the Central Bank and that all have been enforceable.

Validity of the initiative and transition regime

In this Tuesday’s session, the transition regime was approved, which basically defines who will be in the new system and who will not.

It was established that women who have contributed less than 750 weeks will be covered by the reform, as well as men with less than 900 weeks.

There were changes during the validity of the initiative: the Government proposed that the system come into effect on January 1, 2025, but after the agreement with the La U and Liberal party benches, July 2025 was defined as the start date. a date that did not convince several congressmen who argued that there is little time to implement the new system.

The only proposal not endorsed by the Government that was approved by the Senate was to modify article 36, which basically implies that the week requirement for women will remain at 1,000, but could reach 850 if the woman has three children, for example. the proposal to reduce 50 weeks for each child born. The Minister of Labor, Gloria Inés Ramírez, said that the measure is not fiscally sustainable.

For now, none of the changes are carved in stone, as there may be modifications in the debates in the House of Representatives and in conciliation.

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