The pension reform is not as bad as the opposition to the Government says, nor as good as pro-government supporters claim. However, this is an issue that after more than 30 years (Law 100 of 1993) and many shortcomings, it was necessary to take action on one of the clearest expressions of the social rule of law: the protection of old age, disability and death.
It is a gamble as ambitious and generous as it is risky, and it will be necessary, with calculator in hand, to measure its social and economic impact. It is one thing if the State wants to and another if it can, since it does not seem easy to go from 24% to 58% coverage (more than 4.6 million citizens) in just one year of implementation, starting in 2025, and to reach 87% in 2052.
The current system has two regimes: a pay-as-you-go system managed by Colpensiones (a state-owned entity) and an individually funded system managed by private funds, which compete with each other. Colpensiones, with 6.8 million affiliates and 1.7 million pensioners; while the private funds, with 19 million affiliates and only 320 thousand pensioners.
In addition, pension values are very dissimilar. In general terms, they are higher in Colpensiones and very low in the private funds, especially for those of us who contribute based on medium and high incomes. In my life as a mine worker and now as a labor lawyer, I have seen pensions in the private funds that correspond to 35% or less of what would correspond to Colpensiones.
Colpensiones today works at a loss, so that some $23 billion a year from the public treasury, the equivalent of a tax reform, subsidizes the highest pensions. This disparity seems to be corrected by the approved pension reform. There will no longer be competition, but there will be complementarity, in such a way that there will be a basic pension that applies up to 2.3 minimum monthly salaries ─which will be deposited in Colpensiones─ and a complementary pension ─for income above 2.3 minimum salaries─, which will be calculated based on the contributions made and managed by private funds.
A hypothetical example for clarity is that if a person contributes based on $ 6 million, his basic pension in the future is applied up to 2.3 minimum wages (almost $ 3 million) as Colpensiones does today; for his supplementary pension, another $ 3 million is applied on the balance, as the private funds do today. This is good for the finances of the system, but regular for citizens with medium and high contributions. At the end of the day, only Colpensiones will be the only pensioner.
So far, I am only talking about the contributory pillar, which is the one that most interests us, the active contributing workers. But the pension system also has other pillars, starting with the solidarity pillar, which seeks to guarantee that all elderly people in conditions of extreme poverty receive a basic income (currently 223 thousand pesos), readjusted by the CPI every year, which will be financed by the social protection system, the national budget and the pension solidarity fund. Applaudable, because, although it may seem little to us, there are elderly people who survive on that.
The other pillar is the semi-contributory pillar, for those citizens who have contributed to the system between 300 and 999 weeks, eligible under the solidarity pillar, at the age of 65 for men and 60 for women. This pillar will be financed with the contributions of these citizens and the general budget of the nation.
This reform has a differential treatment for women, in line with a recent ruling of the Constitutional Court in all pillars. In the contributory pillar, the number of weeks required will be gradually reduced to 1,000. It may even reduce them to 850, by reducing 50 weeks for each child, up to three.
Not all contributors will move to the new pension system, since there is a transition regime that consists of women with 750 weeks of contributions and men with 900 weeks of contributions, which is good news.
In short, this is a good reform of the pension system, which, although not perfect, was necessary, because sooner rather than later the current system would collapse. However, the one that will come into effect next year must be reviewed. Experts say that the issues of increasing the age and the special benefits for women, who make up more than half of the population, have to be discussed in the future. I believe the same.
Marlon Gómez Lesport
Master's Degree in Labor and Social Security Law
Professor of Law
