The pension reform Delaware gustavo petro proposes the creation of a pillar system, in which around 90% of the members of the private funds would become Colpensions. After the filing of the project, Santiago Montenegro, President of AsofondosHe defended the role of the four private funds in the country and assured that the model proposed by the Government would not be viable over time.
Why do you say that the system would not be sustainable?
What this reform does is move 90% of contributors to a pay-as-you-go or average premium system. Pay-as-you-go systems are unsustainable by definition, due to the demographic transition, as there are fewer and fewer contributors and more older adults. Before, when there were many contributors, it was easy to pay pensions, but in the future there will be even more elderly people.
(Minister of Labor responds to criticism of the labor reform).
That makes these mechanisms unsustainable. In the short term they may give money, but then the breach is armed. So, young people are the big losers, because when they are the elderly, there will not be enough contributors to pay their pensions.
What fiscal impact can this change have?
The pension liability will rise around 220 percentage points of GDP. It is a very large figure and a debt that future generations have to pay. That is an expression of how unsustainable this is and is consistent with the demographic transition and the resource gap that is going to be created.
How do you think the contributory pillar of the reform should be?
The pillar of what goes to the public system, or average premium, should be as small as possible. And the money that should be saved. Ideally, the government should create a public AFP so that all the money that goes to Colpensiones is saved under the same rules of the game as the AFPs, precisely because of the unsustainability of the average premium systems. That is the reform that Colombia should have.
(What’s next for the pension and labor reforms after being filed).
What do you think should be the role of the funds in that pillar system?
What should be done is strengthen savings, have more contributors in individual capitalization and not just 10%. All contributors could contribute to individual capitalization, including a public AFP, it is that not everything has to be private, but everything should be individually capitalized and that people can choose where they want to be, because the average premium or the distribution are not viable .
(Where will the money come from to finance Petro’s pension reform).
And there should be a solidarity pillar, but not financed with contributions, but with general taxes. That’s the kind of system we should have.
In the TES market, funds play an important role. The project proposes a similar figure for Colpensiones.
What impact do you see in the capital market?
As the flow of savings with government bonds is being cut, it will become increasingly difficult to buy government bonds. The Government hopes to do that through a fund within Colpensiones.
It remains to be seen how this will be done, how viable it will be, but ideally what the public sector should have is a public AFP operating under the same rules of the game as the AFPs.
(At what age would non-binary and transsexual people retire).
Do you think that this figure does not replace the funds in that market?
It can replace, but only for the purchase of public bonds, which is what the Government has said it wants to do.
What positive points would the project highlight?
It is good that everything is unified in a single system, and that the different parts are complementary and do not compete with each other. It is good that subsidies to high pensions are eliminated, although, in any case, all people of all incomes will have a subsidy on the first three salaries they contribute.
A third important point is that the coverage of the solidarity pillar is increased, the amount is increased. That seems good to us and the fact that it is focused on the poorest.
LAURA LUCIA BECERRA ELEJALDE