Does Colombia's Pension System Need Big Changes?
Labor, Employment and Benefits attorneys Vicente Umaña and Carolina Castro de la Torre were interviewed by The Dialogue's Financial Services Advisor about Colombia's pension system and presidential candidate Gustavo Petro's proposed changes to it. Petro has proposed redistributing as much as $4.7 billion in private pension fund assets to public pension funds as well as making payments to those who lack pensions. Mr. Umaña and Ms. Castro de la Torre explained that all employees and contractors in Colombia must make monthly contributions to the pension system; they can choose either the the public system (Régimen de Prima Media) or the private system (Régimen de Ahorro Individual). Petro's "Single Pillar System" would require contributors to pay into the public fund to guarantee a minimum salary pension. The attorneys commented that this idea has potential, but they raised several concerns about its execution, such as what will happen to the resources currently in individual accounts in the private system and how current contributors will be able to guarantee minimum pensions in the future.
"At a glance, it does not seem like a bad idea, but several questions arise, and no answers have yet been provided," they said. "...Perhaps it is not a totally bad idea, but it has not been thought through, and the highest risk of all would be implementing it without considering all the variables."