Colombia: Basic retirement income to be guaranteed through a pillar system through a Pensions reform
The legal initiative aims to guarantee a basic retirement income for 2.5 million adults over the age of 65 without the possibility of a pension and implements a pillar system in Colombia to expand coverage.
The initiative is based on several key points such as a pillar system, savings funds and closing gender gaps.
- Pillar system: There will be three pillars, solidarity, semi contributory and contributory pillar.
The solidarity pillar will apply to all people over 65 years old in the country and will cover people who belong to the vulnerable population. This population will be granted an income equivalent to 48 US Dollars.
The semi-contributory pillar will allocate a life annuity to people who were not able to retire, but who have weeks of contributions in Colpensiones (state entity) or savings in their individual account in a Private Pension Fund Administrator (AFP). To be able to obtain it, the project establishes that the beneficiary must be over 65 years old and have contributed a minimum of 150 and a maximum of 999 weeks. People in this group will also receive the amount given in the solidarity pillar.
The contributory pillar will include all persons affiliated to the system in the following manner: Colpensiones (state entity) will receive the contributions up to three minimum wages and the Private Pension Fund Administrators will receive the contributions exceeding 3 minimum wages. These two benefits will be combined or complemented to form a single old-age pension.
The parameters for recognising the old-age pension, such as age, weeks and replacement rate, will be kept. Additionally, those who have the capacity to contribute through voluntary savings will be able to invest their resources without any restriction in order to obtain a better pension.
- Savings fund
It consists of 20% of the total contributions to the contribution system that Colpensiones (state entity) will receive going to a savings fund that will increase that percentage progressively every 10 years.
Those resources will only be used when the nation’s spending in the semi-contributory and contributory pillars exceeds 1% of GDP (Gross Domestic Product) for the respective year.
- Closing gender gaps
The bill aims to be a pioneer in closing gender gaps, as it proposes a reduction of almost one year for each child, with a cap of 150 weeks, to compensate for care work and ensure that women retire with a fair pension.
Key Action Points for Human-Resources and In-House Counsel.
To bear in mind for employers, in terms of social security contributions, disability and survivors’ pensions remain the same, with the same requirements, but will now be recognised by Colpensiones (state entity).
Additionally, acquired rights will be respected, which means that pensioners will keep the same conditions.
A period of 2 years is established so that people who, even if they are less than 10 years away from retirement and have 1,000 weeks or more of contributions, can transfer to the scheme that best suits them in accordance with the provisions of Law 100 of 1993, once they have received double assessment from the public and private funds.