What effects does the pension reform have on young people in Colombia? This is what new contributors should know

With the entry into force of the pension reform, young people in Colombia must take into account changes that will be subject to their working conditions. If you are starting to contribute to the pension system or have been for a few months, this is what you should know.

What are the pillars of the pension reform?

The first thing you should know are the pillars of the pension system that the reform created:

Which pension fund can I join?

It depends on your salary. From June 1, 2025, once the pension reform is in force, young people and other contributors will only be able to choose a pension fund when their income exceeds the specific threshold.

“The reform requires all Colombians that if they have a salary greater than 2.3 minimum, they will have to choose a pension fund to join.. They are going to have to join one of the funds,” explains Kevin Hartmann, an expert lawyer in the pension system, in a conversation with EL TIEMPO.

That is to say:

At how many weeks and age will I be able to retire?

The reform does not modify the pension age. It will continue like this:

However, there are adjustments in the number of weeks of contributions that will be required of Colombians in the contributory pillar.

“Currently, with Law 100 of 1993, in the private pension fund people can retire with 1,150 weeks of contributions. With the pension reform, We are all going to have to contribute at least 1,300 weeks, that is, three more years“says Lesly Vásquez, a lawyer focused on labor law and social security, in dialogue with this newspaper.

Specific, Men will need to contribute more weeks. “All men will no longer be able to pension with 1,150 weeks, but will necessarily have to contribute 1,300 weeks,” adds Linda Vásquez, lawyer at the VZ Abogados Cali firm.

The contribution weeks required for women, on the other hand, will gradually decrease from 1,300 to 1,000. The text of the pension reform established that it will decrease each year in the following way:

How much pension will I be able to receive?

In the contributory pillar, The value of the pension allowance may not exceed 80 percent of the base settlement income, which corresponds to the average of their salaries. And it cannot be less than a minimum wage either.as established in the reform.

“For the vast majority of people, the pensions will be the same if your pension is one minimum wage or lower if you contribute on a contribution base higher than 2.3 minimum wages,” says the lawyer Hartmann.

When I qualify for the pension, will there be enough resources to pay it to me?

The sustainability of the pension system for the coming decades is one of the big doubts.

“The current system is pay-as-you-go. We young people contribute to pay the pensions of the older adults who are retiring. This is how the system is sustained: those of us who are young now will later be adults whose pensions will be paid by other young people,” describes the lawyer Lesly Vásquez.

However, as Dane data have indicated, the birth rate in Colombia is decreasing, so the expert asked whether or not in the future there will be the number of young people necessary to sustain the system?

“There will be fewer and fewer contributors to the contribution system. There will also be less because young people now have many independent jobs, we are less and less linked to a company or formal job. This means that there will be a risk in the sustainability of the system. Yes or yes, in the future young people are going to have more pension requirements“comments the lawyer.

Lawyer Linda Vásquez joins this position in considering that the pension system would not be sustainable: “In 20 years, there will be fewer contributors and more pensioners. This reform does not fundamentally remedy the sustainability of the system.”

For its part, the Colombian Association of Pension and Severance Fund Administrators, Asofondos, has expressed its concern because the reform, for them, leaves “an enormous debt to the younger generations.”

“Young people, our children and grandchildren lose the opportunity to have savings for their old age and certainty about the financing of their pensions”said Santiago Montenegro Trujillo, president of Asofondos.

The Ministry of Labor considers the opposite. In a previous interview with this newspaper, Iván Daniel Jaramillo, vice minister of Employment and Pensions, said that the reform created the mechanisms to guarantee pensions for young people..

“The peace of mind is that the resources that the public system is receiving, given that we are all going to go there up to 2.3 minimum wages, will be in a Savings Fund, that is, they will be allocated to support so that future generations Rest assured that these incomes are reaching the system. In addition, there is the issue of generational accounts to guarantee the financial support of these benefits in the medium and long term,” he insisted.

Besides, The vice minister anticipated that the sustainability of the pension system would be assured for the next 40 yearsa time in which further adjustments can be made in the face of evolving sociodemographic conditions.

Meanwhile, the Minister of Labor, Gloria Inés Ramírez, pointed out that this reform gives a horizon to young Colombians so that they can advance and have social protection: “Usually, many young people do not think about their old age, they think about having the best of their lives. life and that is very good, but we do have to think about old age. This reform gives the possibility and the guarantee that if they contribute to the system they will have the option of pensioning.

He explained that it is a system of intergenerational solidarity and compensation that will effectively allow young people to have a secure future as long as they are employed and contribute.

As a young person, what should I take into account with the pension reform?

The experts consulted by EL TIEMPO agree that the new generations should not only think about contributing, but analyze investments in other fields to have more resources during your old age.

“You should not stop contributing because the years are difficult to recover. It is very expensive and it is probably a worse investment not to contribute. You have to have diversification of savings. Do not think that only the effort made from saving to the social security system will be enough to cover all your needs.“says lawyer Hartmann.

For lawyer Lesly Vásquez, it is timely to review sources that ensure profitability: “We must be aware that the system is in decline, we need to reinforce individual savings.”

“Do not see the pension as an investment. It is like insurance, I am paying something that insures me not only against old age, but also against disability and death. My recommendation is that, apart from the mandatory contributions to the social security system, Think about a savings plan B, like products from the financial system,” concludes lawyer Linda Vásquez.

SEBASTIÁN GARCÍA C.

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*EL TIEMPO is part of a conglomerate of companies to which an AFP belongs.