Colombia: Petro goes after “large pensions” with his latest reform

Since arriving at the Casa de Nariño, Colombia’s president, Gustavo Petro, has proposed a series of reforms that would change the functioning of various sectors in the country.

First, he proposed to modify the health system, and now he is doing the same with the pension system.

This week the draft of the pension and labor reform that will affect the lives of Colombians became known, and following March 22, it will be submitted to Congress to start the respective debate.

This bill intends to create three profiles: those who are affiliated with the pension system and have contributed to it (contributory pillar), those who have not yet been able to retire but have contributed weeks (semi-contributory profile), and those who have not contributed at any time in their lives (solidarity profile).

The particularity of the proposal is that those who belong to the solidarity pillar will receive an income equivalent to Col$223,000 (US$47), and those who belong to the semi-contributory regime will be assigned an income that will depend on the number of weeks they have contributed.

The reform also establishes that for those who are part of the contributory regime, Colpensiones will receive contributions up to the first three minimum wages.

Once this amount is exceeded, other administrators will safeguard the pensions.

Thus, those who receive up to three minimum wages can only contribute to Colpensiones.

Meanwhile, those who exceed that threshold will have to put the first three salaries in the public fund and the rest in a private fund account.

But the pension reform would also bring with it some “small letters” since it would seek to revive the tax on large pensions.

People who receive more than four minimum wages per month will pay from 1 to 2% to the Pension Solidarity Fund.

“What is going to be done is to put those with more saving capacity at a higher rate, which already exists (that of the Pension Solidarity Fund).”

“They will contribute two points more; those who earn more than four minimum wages and pensioners with pensions of more than ten minimum wages will also contribute to the Fund, for example, to pay Col$250,000 for the most vulnerable senior citizens.”

“It is a reasonable distribution among those who have more capacity and without putting finances at risk”, said Mauricio Olivera, vice-rector of the Universidad de Los Andes and former president of Colpensiones.

According to the Center for Economic Studies Anif, if the State takes over the monthly payments of up to three minimum wages of the 25 million current contributors, it would acquire a costly debt with the populations that will retire.

He points out that the problem is that this proposal would further lower the pensions of those who earn higher salaries.

A Semana report reveals the case of people like Mónica Barrera, 38 years old, who has been contributing for 12 years (600 weeks) and has a salary of Col$8 million.

The pension calculator of the state entity today indicates that if she maintains her salary at 57 years of age, she could retire with Col$5.8 million, but, with the reform in which, Monica would have to contribute the first three minimum salaries she receives in Colpensiones and the rest in a private fund, that allowance would be reduced to Col$3.9 million.

It remains to be seen what will happen in the discussions that will take place in Congress as from March 22, where the debate will begin to make this pension reform effective, which for some has been considered a “good idea” but for others could be the opposite.

With information from LGI