The Colombia pension reform continues to advance, achieving express approval of the text in Congress, and the industry of pension fund administrators does not have a good vision from this. According to the union, this reform is a missed opportunity to solve “the underlying problem” of the system in the Latin American country.
From the Colombian Association of Pension and Severance Fund Administrators (Asofondos) –which brings together the AFPs Colfondos, Future, Protection and Skandia– published a statement criticizing the project and pointing out that the “approved text must incorporate improvements in several points.” Without adjustments, the union accused, “some chapters are more harmful and leave a greater debt for young people.”
“For years Asofondos had insisted on the need for a reform that would resolve underlying problems, such as the low coverage of the entire system and the inequity and unsustainability in the public regime. However, The approved reform does not increase pension coverage, although what it does expand is the coverage of subsidies. It also does not eliminate subsidies for high pensions, although it reduces them considerably, it continues to provide subsidies to high-income people. AND forces everyone to be in a subsidized system“, indicated the organization in its letter.
Along these lines, they added that “with this reform The long-term sustainability of the system is not ensured”, considering factors such as the aging of the population and the drop in births.
Although the reform included a saving Fund, From Asofondos they point out that it is very low – saving 22 Colombian pesos for every 100 contributed – and they highlight that official estimates suggest that It will be exhausted in 2062.
“Savings funds should not run out. We are greatly concerned about the fiscal costs of present components in the text approved in the Senate that were not made explicit in the Government’s study, such as: pensions for women with 850 weeks, the costs that Colpensiones must assume when disability pensions are transformed into old-age pensions and the special regimes for peasants, indigenous people, Afros, etc. These costs will surely shorten the life of that savings fund,” the union entity points out.
In that line, your president, Santiago Montenegro Trujilloindicates in the letter that “above all, it is a reform that leaves the younger generations unprotected and with an enormous debt, a debt that increases by 40% compared to what we have today, as recognized in the fiscal guarantee document. of the Ministry of Finance.”
Lost opportunity
From the perspective of savings funds, Asofondos accuses that Colombia lost the opportunity to make a good reform. “Young people, our children and grandchildren lose the opportunity to have savings for their old age and certainty about the financing of their pensions,” Montenegro says in the statement.
Furthermore, in the organization’s opinion, this reform wastes the opportunity for low-income workers to retire with three fewer years of contributions (currently 1,150 weeks) or only by capital (with no weeks or age requirement).
Added to this is that Those who do not meet the requirements to retire will have to wait three more years to receive a benefit for their old age, according to the entity, and indirectly, “all Colombians will have greater difficulty obtaining credit because the reform will weaken the capital market.”
“Only in pension funds is there the possibility of heritability of resources, the ownership of savings for each worker, as well as their freedom to choose, that is lost unfortunately,” adds Montenegro.
The union leader indicates that one of the characteristics of this reform implies lower pensions for middle and upper class people, who hoped to retire in Colpensiones. Along these lines, he points out that the organization will support people to supplement your pension through voluntary contributions and returns in pursuit of their income in old age.
Now, the implementation challenges are great. “A year is a very short time, considering, also, that a large number of items must be regulated by the Government,” indicates the economist.
Furthermore, from Asofondos they indicate that The Latin American country will continue to need a new structural reform, one that “corrects the problems that it leaves alive.”
