The duty of information of the Pension Fund Administrators

In the court ruling SL1452-2019 of April 3^rd, 2019, the Labour Chamber of the Supreme Court of Justice analysed the duty of information of the Pensions Fund Administrators (PFA). Here, the Court provided that the objective of the General Pensions System (GPS) in Colombia is to protect the population against the risks of old-age, invalidity and death through certain benefits and allowances. In the GPS coexist the public pension scheme (in Spanish “Régimen de Prima Media con Prestación Definida” -RPMPD-), managed by the Colombian Pension Administrator -Colpensiones- , and the private pension scheme (in Spanish “Régimen de Ahorro Individual con Solidaridad” -RAIS-) managed by the Pension Fund Administrators (PFA) .

The GPS affiliates may choose freely and voluntarily the best scheme for them, and if such freedom is denied by the employer, it can be sanctioned (article 13 of Law 100,1993). Furthermore, if an individual or a legal entity prevents or affects the right of the employees to affiliate and select the institutions of the GPSS, they can be subject to fines, without prejudice of the ineffectiveness of the affiliation (article 271 Law 100 of 1993).

To ensure employees choose freely and voluntarily their pension scheme, the Supreme Court of Justice ruled that is mandatory to inform them of both available schemes. Thus, if the affiliates ignore the impact that their decisions have over their pension rights, their choice is not free and voluntary. Therefore, PFA’s must clearly inform from the beginning the effects of the pension scheme change in order for the transfer to be effective.

Thus, this Court confirmed that since its incorporation the PFA must provide to the employees complete and apprehensible information.

After that, Law 1328 of 2009 and Decree 2241 of 2010 advanced the protection of the GPS affiliates. Due to this regulatory change, it is not enough that the PFA informs the users about the different options of the market, but they must also provide consulting and good advice. This new duty implies that the PFA must conduct a previous, complete and qualified analysis of the affiliate’s background and the available pension schemes in order to orient the affiliate towards making responsible decisions towards the PFA.

Not to mention, after the entry into force of Law 1748 of 2014, Decree 2071 of 2015 and External Circular Letter No. 016 of 2016, the GPS affiliates are entitled to obtain information of advisors or consultants for both the public and private scheme. This right is known as “double consulting” and must be observed before changing between pension schemes.

To summarize, the Supreme Court of Justice provided that, prior to switching between pension schemes, affiliates must receive information at least of the characteristics, conditions, access, advantages and disadvantages of both pension schemes and information about the consequences for the affiliate of such regime change. Accordingly, it is a requirement to obtain an informed consent which ensures the affiliate understands the risks and consequences of each scheme.

Finally, the Supreme Court of Justice clarified that such informed consent must be proved in order for the transfer to be valid. Hence, it is the PFA’s burden to prove that they conducted all the mandatory proceedings to ensure that the affiliate knew the consequences of the pension scheme switch.