This Thursday, April 27, the annual congress of Asofondos, the union of AFPs (Protection, Future, Skandia and Colfondos), begins in Cartagena. On this occasion, the meeting takes place before a panorama of reform to the system and with a proposal from the Government that would limit the role of private funds. Santiago Montenegro, President of Asofondosspoke with Portafolio about the position of the AFPs and their proposals.
What do you expect for the event at this juncture?
We expect a very well attended event, with much discussion. We are aware that, due to the situation, all the reflectors will be on the Congress of the sector. Of course, the reform will be the topic of conversation. We would like the event to generate analyses, experiences and diverse points of view that contribute to correcting the problems that come with the reform.
(Pension reform: changes proposed by the O. Prosecutor of La Javeriana).
Asofondos has said that the project would end private funds, what is the outlook for the AFPs?
The AFPs manage $360 billion of the workers, they alone are the owners of that savings that has been built in 28 years, thanks to their contributions together with those of their beneficiaries, and also to the returns that the AFPs have generated.
Our vocation is to protect that savings, and to continue managing what is and will be the only guarantee for a calmer old age for millions of Colombians, that is why we give discussions that aim at that purpose: savings, savings, savings.
What implications does the aging of the population have on fiscal accounts and pensions?
Pay-as-you-go systems such as the one administered by Colpensiones and on which the reform is committed are financially unsustainable because the ratio between active contributors has fallen and will continue to fall, precisely because of the aging of the population. Without savings, pension systems become unviable.
(Food allowance for parents: how you can request it).
Betting on the distribution is leaving young people a tremendously expensive bill to pay, almost impossible to meet.
If you go to a pillar system, what is a viable ceiling in the contributory?
We support the existence of a solidarity pillar, a semi-contributory one and a contributory one. We have insisted that the contributory pillar must be based on savings. This threshold of three minimum wages divides the pillars into two components, in an inconvenient way, and quite exotic, if we see the experience and international trends.
The higher this threshold, the more adverse impact on savings, and the higher the subsidies received by high pensions and, therefore, the higher the fiscal cost.
(Pension: the allowance of people with less than a thousand weeks of contributions).
What is the reform that Colombia requires?
One that eliminates competition between the mechanisms, something positive of the Government’s project, but that maintains the freedom to choose between various entities included of a public nature, that compete on equal terms. We have to move towards the countries with the best systems, which have something in common: very large pension savings that continue to accumulate.
If the Government insists on giving subsidies, it can do so when people reach pension age, in a transparent manner, without compromising savings, or spreading the problem to future generations.
(Reforms could cost 1% of GDP growth according to U. Eafit).
Is it time to adjust the parameters?
The project already increases weeks and ages. For example, for a man, or a woman with fewer than three children, who is in a private fund, the number of weeks needed to retire will increase. Those who do not retire are increased in age. Today they will receive their benefit at 62 if they are men and at 57 if they are women, but with the reform they will receive it at 65.
(Pros and cons that the agricultural contract would bring).
What do you think of the Savings Fund that is proposed for Colpensiones to invest in TES?
As it is in the project, the fund does not save, Colpensiones will continue in deficit and the Government will have to continue covering the deficit. It is not clear that this fund seeks the best investment options that multiply the resources of future pensioners.
Many questions arise: Who is going to manage it? How is it shielded so that the government on duty does not get hold of it? How is your management separated from the political cycle? Don’t forget what happened to Social Security reserves. This chapter has already been experienced by the country, with very bad results.
Has Congress picked up on these concerns?
We will be in some hearings and academic spaces explaining the problems of the project and that we have time to correct it. Colombia needs a pension reform, but not the one that was filed, but a good one. What we do today will have consequences for decades.
LAURA LUCIA BECERRA ELEJALDE
Portfolio Journalist