First, we must consider that Law 100 of 1993 gave rise to two complementary but different regimes through which one could access old-age insurance.
The first is the Average Premium Regime (RPM) with defined benefits, administered by a public entity, which has established the general conditions for accessing the pension right, such as age and weeks, and the payment of these depends on the contributions of affiliates and the state's contribution. On the other hand, the Individual Savings Regime with Solidarity (RAIS), administered by private entities, establishes specific conditions for accessing old-age pensions, which depend exclusively on the affiliate's contributions and the returns they have generated.
Now, even though the complementary nature of both regimes was established, from the outset there has been a notable disparity in their sustainability, as major reforms have mostly fallen on the RPM, which is why the need arose to carry out a structural reform of the general pension system, in which solutions can be provided to the sustainability problems that mainly affect the RPM.
Therefore, the norms that marked the beginning of the gradual increase in requirements to access economic benefits for old age are Laws 797 and 860 of 2003; however, the regulatory changes introduced since the system's entry into force have proven insufficient to address the crisis, which led to the emergence of multiple reform proposals.
This is why the pension reform proposed by the current government aims to make a substantial change to the current old-age protection system, eliminating the coexistence of two parallel regimes (RAIS and RPM) and migrating towards a pillar system, namely:
- Solidarity Pillar: comprises people in extreme poverty and vulnerability, and the objective is to guarantee a basic solidarity income to protect the minimum subsistence conditions of poor older adults.
- Semi-contributory Pillar: applies to people affiliated with the system who, at age 65, have not met the requirements to access the contributory pension despite having contributed to the system, and includes people in the Periodic Economic Benefits Program (BEPS).
- Contributory Pillar: is aimed at dependent and independent workers, public servants, and people with the ability to pay contributions, allowing them to access a comprehensive old-age, disability, or survivors' pension.
It is important to note that this pillar is composed of:
Contributory Pillar in its Average Premium Component: is made up of all people affiliated with the system and will receive contributions from the base contribution income between one (1) SMMLV and three (3) SMMLV.
The benefits of this pillar are financed with resources from the common old-age fund and a defined benefit mechanism, and the contributory savings fund created by this law.
Contributory Pillar in its Individual Savings Component: is made up of all people affiliated with the system whose income exceeds three (3) SMMLV and will receive contributions for the part of the base contribution income that exceeds three (3) SMMLV and up to twenty-five (25) SMMLV, whose benefits are financed with the amount of individual savings achieved and their respective financial returns.
- Voluntary Savings: applies to those who have the ability to pay and can save an additional amount.
Accordingly, we currently find a series of modifications contained in this pension reform, among which are the following general provisions:
- Savings Fund: one of the critical issues of the new reform is the creation of a fund to save a fraction of the contribution flows in the public pillar (up to 3 minimum wages) to avoid short-term public debt financing problems and to have reserves to pay the pensions of future retirees.
- Benefit for women with children: in the Average Premium Component of the Contributory Pillar, as recognition of unpaid work, the number of required weeks will be reduced by fifty weeks for each live-born or adopted child, down to a minimum of 1,150 weeks for a maximum of three children.
- A transition regime is proposed for people already affiliated with the system who have 1,000 weeks of contributions, who will have the conditions established in the previous regime respected.
- For those affiliated with the RPM who are not in the transition regime and who contribute more than three minimum wages per month, they must select an administrator for the complementary individual savings component within the first six months after this Law comes into effect; if they do not, they will be assigned randomly.
- Conditions for retirement regarding age will be 57 years for women and 62 years for men, and they must have 1,300 weeks. In the case of non-binary individuals, the lower age will apply, and for transgender individuals, the age will be that established for the gender they have when they meet the requirements.
In short, the pension reform in Colombia is necessary to guarantee the financial sustainability of the system and improve coverage; additionally, it seeks to guarantee a decent pension for all citizens. However, the implementation of this reform may face several challenges, one of which is the high rate of labor informality in the country, which could hinder the implementation of an individual savings system. This is why the reform is a matter of great importance for the future of Colombians and must be rigorously analyzed to ensure a dignified and fair old age for citizens.