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With the reform, Asofondos estimates that 80% of affiliates will not be able to retire

The union warned about the loss of benefits with this bill, such as ownership of savings and freedom of choice.

With the reform, Asofondos estimates that 80% of affiliates will not be able to retire
With the reform, Asofondos estimates that 80% of affiliates will not be able to retire | Image taken from larepublica.co

While waiting for the next legislature of Congress to begin, the analysis of the government, health and pension reforms continues, which have already passed their first debate in the House of Representatives.


Regarding the second project, Asofondos, which brings together the Pension Fund Administrators (AFP), warned that with the approval so far of the new pension system model, 80% of affiliates will not be able to retire and will lose most of their returns .


One of the great criticisms that the union has made is that the model would not be sustainable over time, since there are fewer and fewer young people to support a pay-as-you-go system, such as Colpensiones.


In fact, last week the Dane released the figures from the Vital Statistics Survey, in which an annual drop of 7.9% was observed in the number of births in the first quarter of the year, reaching 127,676. Some analysts even warn that at some point the number of births may equal the number of deaths.


Asofondos also warned about the loss of benefits with this bill: ownership of savings, freedom of choice, heritability, possibility of pension before retirement age. In addition to the blow to savings.


Regarding the first point, Asofondos pointed out that by dividing the contributory pillar in two and forcing the contributions of the first three minimum wages to go to Colpensiones, "the portion of the contribution corresponding to those salaries ceases to be individual property", with which that "90% of the workers, immediately, will be left without this property of their savings flow".


As a second point, he pointed out that freedom of choice is lost, since article 18 obliges all affiliates to contribute to Colpensiones up to three minimum wages, and only above that amount will be able to choose.


"Freedom of choice is highly valued by Colombians, since currently we are all allowed to choose which entity manages our savings and offers the best returns," says the union leader, based on the survey carried out by the Centro Nacional de Consultoría (CNC), which says that 78% of those surveyed prefer to be free," Asofondos said in a document.


Another of the benefits that is lost, according to the union, is that of heritability, since "they will not be able to choose the type of pension in which the balance of their account remains as an inheritance to their children of legal age or other relatives up to the fifth degree of consanguinity".


The same happens with the possibility of retiring before the retirement age, since "the possibility that today workers have of retiring before reaching the pension age is eliminated if they have sufficient capital. This option, which today is a right , is increasingly appreciated by the new generations," said the union.


Finally, the president of Asofondos, Santiago Montenegro, pointed out that the project affects the generation of pension savings and, as a consequence, the country's macroeconomic savings. "Due to article 24, we estimate that only a fifth of the contributions will be saved and the rest will go to the common fund to pay the pensions of those who are already pensioners in Colpensiones," Montenegro said.


What the union proposes


For the union, although the country does need a pension reform, adjustments must be made to the Government's proposal. They raise four, the first is that saving is a fundamental pillar. "Due to the demographic transition and the aging of the population, we insist that the contributory pillar must be fundamentally savings, managed by private and public entities."


A second point is to make adjustments to the semi-contributory pillar, because according to Asofondos, as the project turned out, a worker who contributed over a minimum wage will receive only $90,000 per month, while with an AFP he would receive $202,000.


Although the government project reduces subsidies for high wages, the union suggests that they be eliminated, since with the reform, pensions that are settled over more than three minimums would receive subsidies close to $400 million.


"These subsidies should not be given to high incomes and, therefore, the lower the threshold, the lower the subsidy. With a system based fundamentally on savings, the subsidy for high incomes disappears."


As a last point, they propose that freedom of choice prevail. "We believe that Colombians should be able to choose who manages their savings, and that each affiliate should always have an account with this savings in their name. This, regardless of how the pension is settled when they reach legal age."


Article taken from larepublica.co

By: Carolina Salazar Sierra


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