Proposals of the new government plans of the presidential candidates regarding the Pension System in Colombia

On the eve of the first round of the presidential elections, where voters will decide who becomes the president of the Republic of Colombia for the next four years, it is important to show and analyze the main proposals that exist in pension matters. All the government programs of the different candidates agree in the imperious need of a pension reform, as a mechanism to reduce social inequality and achieve greater equity for Colombians, seeking as a main goal to guarantee the right to a decent economic income for all senior citizens, given that a significant number of the population does not have access to a decent pension that guarantees their quality of life.

Therefore, it is necessary to understand that the Social Security System in Colombia has as its target the protection of the contingencies that may affect a person and his family, from diseases, accidents, old age and death, in order to grant economic or assistance benefits, which guarantee the inalienable rights and quality of life in accordance with human dignity.

In accordance with the above, pensions are part of this System, established in Law 100 of 1993, through the existence of two exclusive but coexisting pension systems, the Public Pension System (Régimen de Prima Media) and the Private Pension System (Régimen de Ahorro Individual con Solidaridad), both of which mainly recognize old age, disability and death pensions for survivors, in compliance with certain requirements established by the Law.

The main differences in the pension systems are as follows:

Likewise, Colombia has a pension structure divided into two large groups, one is the contributory model that includes workers, public employees and independent workers with the capacity to pay, and the other is a subsidized model that seeks to expand the coverage of the system to the population with low economic capacity, where there are state programs: i) the Periodic Economic Benefits (BEPS), and ii) the Older Colombia Program.

Therefore, one of the main challenges for the country is the expansion of the coverage and financing of the Pension System, taking into account the worrying figures provided by the Employment Mission in its report for the years 2020 and 2021, where 53 out of every 100 people of pensionable age lack protection, i.e. more than 50% of the country's population has no income to subsist in their old age.

This report also indicates that 23.2% of the people of pensionable age are covered by a pension recognized by the Private Funds or by Colpensiones. Of this population, 85.8% is affiliated to Colpensiones and only 14.2% is affiliated to Private Pension Funds, while 77 out of every 100 pensioners in Colpensiones have a pension equal to or less than 2 Colombian Legal Minimum Wages. The above taking into account that for the month of September 2021 the number of pensioners in Colpensiones was 1,475,853, while in the Private System (RAIS) for the period of October 2020 the number of pensioners was 204,926.

Since the first pension reforms that the country has had in the last century and this one, academic sectors and even the International Labor Organization (ILO) have proposed a universal basic income, understood as a minimum economic benefit for people without resources and with difficulty in accessing the labor market. The purpose of the measure is to reduce poverty and inequality, seeking dignity and human rights, focused on the lack of protection generated by unemployment. This proposal is adopted by all presidential candidates as a minimum standard of pension rights, seeking to guarantee a form of protection for old age and ensure a dignified life for all people of retirement age.

The following are the most relevant pension proposals of the presidential candidates, their coincidences and differences:

• Universal basic income: Insurable for all senior citizens, mainly those who have not met the legal requirements to receive an old-age pension:

• Increasing age and weeks of contribution?

• Pillar system: Two of the presidential candidates propose a pillar system, in which Public pension System and the Private pension System would complement each other, establishing non-contributory, contributory and complementary pillars:

• Pension reform?

On this aspect, all candidates agree that the country needs a pension reform that guarantees a pension for all citizens, including people with low economic resources. Regarding the requirements that currently apply, two of the candidates are emphatic that:

• Maintain the public pension system administered by Colpensiones?

In this regard, the candidates agree on the need to maintain and strengthen the public pension system administered by Colpensiones.

From our perspective, the proposal of the universal basic income requires developing the principle of solidarity that governs the Social Security System and facilitating the administration of resources to generate more dignified conditions for the elderly population, and in that sense, such a proposal is convenient, but only a government program establishes how this objective could be achieved. Within this government plan, a tax and labor reform are proposed to ensure the resources to support the solidarity pillar.

It should be noted that the pillar system has already been implemented in other countries with encouraging results and has shown that it eliminates competition between both pension systems, making them complementary. However, it is necessary to consider the expansion of social security coverage and its inclusion from a perspective of financing the system for informal workers, as was contemplated in the repealed law of Social Protection Floors/Standards, as well as State support in the payment of contributions for those companies in the process of creation and consolidation, which would be an incentive for the formalization of their workers.

Regarding the proposal for acquiring weeks, which translates into the possibility of the member being able to pay the system for the time missing to fulfil the minimum weeks requirement, and which is one of the proposals presented by one of the candidates for increasing coverage, we consider that it would be a positive aspect for increasing the flow of resources of the pension system; provided that the monitoring and control mechanisms and, above all, the correlation between what the member pays and what the system will subsidize coincide, allowing this scheme to operate for the recognition of pensions of up to 2 Colombian Minimum Wages, guaranteeing an economic balance for the system. 

On the other hand, it is clear that the BEPS system must be modified to recognize benefits that meet the real needs of its contributors. In this regard, the current government is promoting a draft decree to benefit people who do not complete the pension requirements, so that they transfer these resources to the BEPS program, the State grants an additional 20% and the member can receive a life annuity of up to $850,000 per month.

We also consider important the notion of strengthening Colpensiones, understanding that this administrator has been making efforts to substantially improve its operation and administration, providing greater legal certainty in the definition of the requirements to qualify for a pension. However, the deficit of the public pension system continues to be of concern to the extent that the administration of its resources does not generate the necessary yields to cover the subsidies of the highest pensions, being the contributors with higher incomes the ones who are currently supporting this pension system to a greater extent.

As a conclusion, it is worth highlighting that within the current pension system the notions of the mission of employment in the matter and the positions of the different programs of the presidential candidates, we find that there is clarity and consistency, as well as the correlation between the reality and the needs of the most vulnerable citizens, but the mechanism of administration and profitability of the pension resources that should include mainly good practices in organizational and anti-corruption matters is still in the pipeline.