Pension reform, What progress has the bill made before Congress and what remains to be discussed?

On April 23, 2024, Bill 293, which seeks to modify the current General Pension System, managed to obtain the necessary votes before the Senate of the Republic to be approved and, consequently, in the next few weeks it will be debated before the House of Representatives. Remember that the reform bill, presented by the National Government, aims to be more inclusive, expanding coverage for old age, disability, and death contingencies, through a pillar system.

The following is a brief summary of the most important articles proposed by this reform and approved by the Senate:

1. This article proposes a structural change from two pension systems to a four-pillar system, as follows:

2. Amount of contributions. The contribution to the contributory pillar remains at 16% of the base contribution income. For dependent employees, the employer will pay 75% of the contribution and the worker the remaining 25%. Self-employed workers are responsable for 100% of the contribution.

3. Requirements to access a full old age pension. According to the bill, the requirements to be entitled to a comprehensive old age pension remain as follows:

a. Have reached 57 years of age if female and 62 years of age if male;

b. To have contributed a minimum of 1,300 weeks at any time. However, in the case of women, the minimum weeks required will decrease to 1,000 weeks of contribution, as of January 1, 2025. It is recalled that the change, regarding the requirement of weeks of contribution for women, derives from judgement C-197 of 2023, in which the Constitutional Court urged Congress, together with the National Government, to define a regime that guarantees conditions of equity and effective access to the right to an old age pension for women -especially for those who are heads of household-, which contributes to close the historical gender gap.

The date proposed in the bill will be January 1, 2025 and the decrease will begin to be phased in at 25 weeks each year, as follows:

4. Transitional regime. Regarding the dilemma of who will be covered by the new rules of the Integral Social Protection System for Old Age (Bill 293) and who will continue to be covered by the current General Pension System (Law 100 of 1993), the Senate has approved that the only requirement to be considered is the number of weeks contributed at the time the new Law enters into force. This number of weeks will be: 750 weeks for women and 900 weeks for men.

5. Opportunity to transfer between regimes. Those who are beneficiaries of the aforementioned transition regime, that is, those who have 750 weeks of contributions, in the case of women, and 900 weeks of contributions, in the case of men, at the entry into force of the Law, and who are less than 10 years away from reaching the pension age, will have a period of 2 years to transfer from one regime to another.

6. Administration of the contributory pillar fund. Regarding the entity responsible for managing the resources of the Contributory Pillar Savings Fund, it is important to point out that at the beginning, the National Government had proposed that it should be Colpensiones; however, in view of the strong doubts of several political parties that this money could be used for other purposes, the Senate approved that the administrator of this special account should be the Banco de la República (Central Bank).  

7. Effective date of this bill. One of the most debated articles during the Senate sessions was the date on which the Integral Social Protection System for the Elderly would become effective. Although in the initial document the Government had proposed January 1, 2025 as the date, this was modified to provide instead that the new Law shall enter into force on July 1, 2025.

It should be noted that the bill approved by the Senate may have significant changes in all or part of its articles during the two debates before the House of Representatives. The foregoing, since during the remaining legislative process, the representatives will have the power to review again the entire bill and make the adjustments they deem pertinent.

In principle, the House will have until June 20, 2024, when the current legislature ends, to debate the bill before the President signs it. On the other hand, if the pension reform bill does not materialize by this date, it will be shelved.