Despite a turbulent end of the legislature, whose outcome is remembered for the collapse of the draft labor reforms of the President Gustavo PetroOne of the restructuring proposals that were part of the package of articles presented by the head of state that managed to survive for the next legislature is the pension reform.
This bill has not been spared from controversy, since there have been divided opinions regarding its functionality or viability regarding this proposal, being defended by the same Government and questioned by opposition sectors and various individual savings pension entities , better known as private funds.
(‘What we ask for is a social pact’: Petro talks about the reforms).
Santiago Montenegro, President of AsofondosHe believes that, in effect, the reform that the president supports has aspects that can be highlighted, but there are others that can be very delicate for the system.
What are the problems?
From Asofondos it is explained that there are several points of the reform that are critical and that, urgently, they have to be modified in the debates that the bill will have in the next legislature.
(28.4% of older adults are in a situation of poverty).
1. Ownership of individual savings could be lost due to the proposal to divide the contributory pillar in two and transfer people who earn up to three minimum wages to the medium premium fund (Colpensiones). According to figures from the organization, 90% of workers would stay if they owned their pension savings flow.
2. This new regime would force workers who earn up to three minimum wages to contribute to Colpensiones. «Freedom of choice is highly valued by Colombians, since currently we are all allowed to choose which entity manages our savings and offers the best returns», said Montenegro, quoted by ‘Valora Analitik’.
(Alert on sustainability of the Government pension).
3. If the bill is approved, workers will not have the possibility of transferring their savings to their children of legal age or other relatives of up to the fifth degree of consanguinity by way of inheritance.
4. According to Asofondos, the possibility that contributors would lose the possibility of retiring before reaching the required pension age would end, something that the current system, regulated in the Law 100allowed if the weeks required to retire are completed.
(Why social reforms are not included in extra sessions).
5. He pension savings and the macroeconomic savings, according to the entity, would also be affected if the reform is approved. «We estimate that only a fifth of the contributions will be saved and the rest will go to the common fund to pay the pensions of those who are already pensioners in ColpensionesMontenegro added.
6. Due to several changes in the demographic scope of the country, the initiative to create a common pension fund, according to Asofondos, would not be sustainable: «While countries in the world strengthen savings, in Colombia we move in the opposite direction. Accumulated savings, today around $372 billion, equivalent to 25% of GDP, will fall to 10% by 2050«.
From Asofondos it is mentioned that, despite the fact that the bill falls short to address the deficiencies that the current pension system has, It is necessary to seek to address several important points.
An example is considering the demographic transition and the growth of old age in the population, while making an adjustment to the contributory pillar so that people who do not manage to retire can receive a solidarity subsidy.
«But, as the project was, a worker who contributed over a minimum wage would only receive about $90,000 per month, while with an AFP he would receive $202,000«, is mentioned from Asofondos.
Another recommendation is aim to remove subsidies for high-income workers and finally, guarantee the freedom of choice of workers on the pension fund they prefer.
«We believe that Colombians should be able to choose who manages their savings, and that each affiliate should always have an account with this savings in their name. This, regardless of how the pension is settled when you reach legal ageMontenegro said.