A win for Petro: The pension reform
A win for Petro: The pension reform
On June 14, Congress adopted Petro's pension reform, a big win for the government after a tough few months. An analysis of the current system, the new system and the next steps.
President Gustavo Petro’s pension reform was adopted, in extremis, by Congress on June 14. It was in a race against the clock to be adopted before June 20, the final day of the current legislative term. This article discusses how it was adopted but also the details of Colombia’s current pension system, Petro’s new pension system and some of the benefits and challenges of the new system.
A final, controversial pupitrazo
To become a law, a bill must be approved in four debates in Congress—two debates in each house, in commission and then in the plenary. In case of differences between the versions adopted, a conciliation commission is formed to reconciliate the texts, which must then be approved by both houses. There is a time limit on the legislative procedure: a bill must have received at least one debate within one legislatura, or legislative term (which is made up of two congressional sessions) to continue onwards, and no bill may be debated for more than two legislative terms.
The pension reform was introduced in March 2023 and was approved in its first debate, in the seventh commission of the Senate, in June 2023, days before the end of the 2022-2023 legislative term. It must therefore be adopted by Congress by the end of the current legislative term, on June 20. The reform was approved in second debate in the plenary of the Senate on April 23, and was quickly approved in third debate in the seventh commission of the House of Representatives on May 23. The plenary of the House took up the fourth and last debate on June 10.
With the opposition working to filibuster debate (with recusals and other tactics), the government anxiously looked at the clock and was worried that things weren’t going at the right pace. On June 13, the House rejected the opposition’s motion to kill the reform, and on June 20 voted in favour of the positive ponencia, opening the formal debate on the text (and examining every article and over 400 amendments). Yet, time was running out, even with a sitting exceptionally scheduled for Saturday (June 15). On a very tight schedule, the government calculated that the House would need to adopt the full text, at the latest, by Monday or Tuesday (June 17/18), before going to conciliation and the conciliated text being adopted by both houses on June 20 at the latest. However, the government and the Pacto worried if Iván Name, the president of the Senate and regular critic of the administration, would schedule the conciliation by June 20.
To cut short a debate that threatened to be (too) long, avoid a conciliation process and avoid any shenanigans by Name in the Senate, the government and its allies proposed a motion to adopt the text that had been adopted by the Senate in April. The motion was carried with 86 votes in favour, 32 against and 69 abstentions or absences. The Pacto (except for three members who voted against), Comunes (ex-FARC), a majority of the Liberals and La U and some Conservatives and Greens formed the majority. The right-wing opposition (CD and CR) left the chamber to denounce a ‘stolen’ debate. The rapid adoption of a bill without proper debate is known in Colombia as a pupitrazo, referring to voting by banging on the desks.
Before coming up with the motion, the government consulted legal experts to confirm the legality of this pupitrazo—as always in Colombia, there were different legal opinions and the issue will finish in the hands of the Constitutional Court. In the government’s view, it was legal—the Senate’s text had been published in the congressional gazette and there was some debate in the House. However, not everybody agrees—the opposition, other government critics and some analysts all claim that this was unconstitutional and will be struck down by the Constitutional Court for procedural violations, like a lack of debate and deliberation in the House. There’s plenty of precedent for laws being struck down by the court on procedural grounds, including Iván Duque’s 2018 tax reform.
The CD has already said they’d challenge the new law in the Constitutional Court, claiming its adoption was undemocratic because they were unable to debate each article. Other representatives strongly criticized the pupitrazo. Jennifer Pedraza (Dignidad) warned the government that it was a violation of procedure and that it’d be struck down by the Court—“don’t say it was a golpe blando later”. Pedraza added that the government still had five days and had majorities in the House. Katherine Miranda (Green) explained why she thinks that the reform will be struck down in the Court, while progressive Liberal rep. Juan Carlos Losada said that he never imagined that a left-wing government would ignore democracy, bicameralism and deliberation in the way previous right-wing governments had.
Awaiting the Constitutional Court’s decision, which won’t come for several months, the adoption of the pension reform, regardless of the way in which it ended, is a major legislative victory for Petro in an otherwise horrible year for the administration. His government has been hit by major scandals, countless controversies, protests and the brutal defeat of its healthcare reform in April. Its legislative agenda was languishing in Congress, and Petro’s frustration with the setbacks in Congress and the difficulties in advancing his reformist agenda through it had fueled Petro’s increasingly radical, populist rhetoric including his ‘constituent process’ idea. The adoption of the pension reform was ‘historic’, according to the president, and weakens, for the time being, his ‘constituent process’ idea (which was supposed to be a reaction to the ‘oligarchy’ blocking his reforms in Congress).
Fixing a broken system
There’s rather widespread consensus that Colombia’s pension system has major problems and is in need of long overdue structural reforms.
The current pension system, a creation of Law 100 of 1993, is complicated and has several major problems. It’s made up of two parallel, competing systems: a public defined-benefit system (Régimen de Prima Media, RPM), administered by Colpensiones, and private, defined-contribution individual accounts (Régimen de Ahorro Individual con Solidaridad, RAIS), administered by private pension fund administrators (AFP). People must choose between the systems and may switch every five years up to 10 years before retirement. The payroll contributions are the same for both system (16% of covered earnings), but the qualifying conditions are different, although both systems guarantee a minimum pension (the minimum wage) to those who don’t meet qualifying conditions. Most working-age contributors are affiliated with the AFPs (73%) but most pensioners are in Colpensiones (84%).
There are four AFPs in Colombia today: Protección, Porvenir, Colfondos and Skandia/Old Mutual. Porvenir belongs to the Grupo Aval, the holding of Luis Carlos Sarmiento, Colombia’s richest man; Protección belongs to Grupo Sura, part of the Grupo Empresarial Antioqueño (the keiretsu of Antioquia’s traditional business elites); Colfondos is now owned by a Chilean AFP and Skandia is part of a conglomerate whose main shareholder is a Singapore-based company. Porvenir, followed by Protección, control 90% of the market amongst themselves.
In the RPM, the retirement age is 62 for men and 57 for women, with at least 1,300 weeks of contributions. The replacement rate depends on the number of weeks of contributions, varying between 55% and 80%. Those who don’t have enough weeks of contribution receive an indemnización sustitutiva, a refund of (a portion of) the contributions made adjusted for inflation, without the interest accrued.
In the RAIS, a person may retire at any age if their account balance (contributions plus financial returns) is sufficient to purchase an annuity greater than 110% of the minimum wage. Those who reach the retirement age and have at least 1,150 weeks of contributions but don’t have the sufficient account balance received a guaranteed minimum pension, equal to the minimum wage. Those who don’t meet either of those conditions receive a devolución de saldo, a (partial) balance refund plus financial returns on contributions made.
The pension system has several major, structural problems. Pension coverage is very low, with only 25% of seniors receiving a pension (another 10% or so receive pensions from special regimes for the public sector, military and teachers) and 45% having no old age protection at all. It’s estimated that about 40% of pensioners don’t meet the requirements for a pension and only receive an indemnización sustitutiva or devolución de saldo. 55.3% of pensioners in the RPM get a monthly pension of one minimum wage and only 12% get a pension that’s more than two minimum wages.
Only about 42% of the employed population contributes for pensions (and, in 2019, only 34% of adults who had worked at any point in their life contributed to a pension), because of very high labour informality (56%) and low wages (around 45% earn less than the minimum wage—which is the minimum salary to contribute to pensions). Moreover, in both systems, less than half of those affiliated are active contributors, and a majority contribute on a base salary of one minimum wage (65% of RAIS affiliates have a salary of one minimum wage) and people with the lowest salaries also accumulate fewer weeks of contributions.
The coexistence of two systems operating under different rules means that two workers with identical contribution histories can acquire different pension entitlements at retirement. The RPM offers higher replacement rates than the RAIS, particularly for those with higher incomes and a more stable work history, but for those with a more unstable work history and lower income who will not qualify for a pension, the devolución de saldo is much higher than the indemnización sustitutiva in the RPM, given that the former recognizes financial returns on contributions.
To help fix some of these problems, past governments created a subsidized voluntary, flexible individual savings account program (BEPS) for workers earning less than the minimum wage allowing them to make intermittent contributions, as well as a very meagre means-tested pension subsidy for the very poor (Colombia Mayor). 1.67 million people receive this subsidy, which only pays 80,000 pesos ($20) a month, below the extreme poverty line. In May 2024, Petro announced that beneficiaries over 80 will receive 225,000 pesos.
There are significant regional and gender differences in pension coverage. Pension contributions are much lower in smaller towns and rural areas, with only about 15% of the employed population contributing to pensions (in big cities, it’s closer to 50%). Very few self-employed workers contribute to the pension system (about 10% in 2012). While women have a lower retirement age than men, the gender wage gap (and gender discrimination on the labour market) and women’s longer life expectancy means that women require a greater effort to meet the pension requirements, and if they do, they’ll do so with a lower replacement rate than men. While 31% of elderly men receive a pension, only 21% of elderly women get one. In 2023 and 2024, the Constitutional Court ordered that the number of weeks of contributions required for women be lowered to 1,000, in both the RPM and RAIS, and gave Congress until December 31, 2025 to do so. If not, the number of weeks of contributions required for women will be gradually reduced by 50 weeks each year until reaching 1,000 weeks.
The fiscal cost of the pension system, which includes several special regimes, is high in relation to its coverage: around 3.4% of GDP and 25% of the government tax revenues. Colpensiones has run a deficit since 2004, which costs the government about 1% of GDP annually. However, the special regimes are heavily subsidized and are the costliest to the nation. Most are gradually withering away (not taking in any new beneficiaries), but it will take up to 70 years. Pension reforms in the early 2000s, which increased contributions, raised the retirement age and qualifying conditions, abolished most special regimes and accelerated the transition to the current system, helped improve the system’s financial sustainability, reducing the pension liability to about 110% of GDP.
Moreover, the public system has regressive implicit subsidies for high-income beneficiaries. According to research in 2015, a married male pensioner who contributed on the basis of 25 minimum wages receive an implicit subsidy of up to 1,000 million pesos while one who contributed for one minimum wage receive a subsidy between 63 and 143 million pesos. Around 75-80% of implicit pension subsidies are paid to the wealthiest 20% of the population. Adding to the regresiveness of the system, pensions are effectively not taxed—monthly pensions of up to 47 million pesos are tax-exempt (the maximum pension by law is 25 minimum wages, or 32.5 million pesos in 2024). In the private funds, subsidies are more explicit and progressive.
Petro’s pension reform: A pillars system
The government’s pension reform creates a unified pillars system, with three pillars complementing each other.
The reform is not particularly radical. Most experts, academics, think-tanks and politicians across the political spectrum, as well as the OECD and World Bank, have proposed a pillars system as well, looking to certain European pension systemes and the 2008 Chilean pension reform. The liberal think-tank Fedesarrollo proposed a very similar pillars system.
The final text of the reform can be found here.
Non-contributory pillar
A basic, non-contributory ‘solidarity pillar’ (pilar solidario) will guarantee a basic minimum income (Renta Básica Solidaria) equivalent to the extreme poverty line (thereafter indexed to inflation) for poor and vulnerable seniors over 65 (men) or 60 (women) who do not qualify for a pension (or at 55/50 for those with a loss of work capacity equal to or greater than 50%). The benefits will be administered by the labour ministry, and paid out of the national budget.
The non-contributory pillar will benefit about 2.5 million people, up from 1.7 million who currently receive Colombia Mayor. They’ll receive about 223,000 pesos each month, instead of 80,000 pesos with Colombia Mayor.
Semi-contributory pillar
A semi-contributory pillar will provide a pension for those who contributed (between 300 and 1,000 weeks) to the system but do not qualify for a pension at the age of 65 (men) or 60 (women). They’ll receive an annuity based on the value of their contributions, adjusted for inflation. Those who qualify for the solidarity pillar will also receive that benefit, while others will receive an annuity adjusted for inflation plus a 3% annual return and a top-up subsidy (20% for men, 30% for women, of the remaining balance). The benefits under this pillar may not exceed 80% of the minimum wage and are non-inheritable. This pillar includes the existing BEPS system. Those who have contributed less than 300 weeks will receive a refund of their contributions, as under the current system.
Main contributory pillar
The main contributory pillar, for employed workers and the self-employed, is made up of a defined benefits (RPM) and individual accounts (RAIS) components, which complement each other rather than competing.
Everyone earning up to 2.3 times the minimum wage will make compulsory contributions to the defined benefit component (Colpensiones) on the basis of income between one and 2.3 minimum wages. Anyone with additional earnings above 2.3 times the minimum wage, up to 25 times the minimum wage, will contribute to the individual accounts component managed by the AFPs (though the reform opens the door for Colpensiones to also manage this component), which complements the defined benefit component.
The pension, paid by Colpensiones, would be the sum of both components, and the qualifying conditions will remain those of the RPM, although the number of weeks required will be gradually reduced, by 25 weeks each year from 2025, to 1,000 weeks (by 2036). An actuarial system of equivalencies may be used to credit additional weeks to meet the requirements, using resources in the individual accounts component and voluntary savings pillar. The formula for calculating the replacement rate remains unchanged.
Current payroll contributions remain unchanged at 16%, split 75/25 between the employer and employee. Those earning over four minimum wages will continue to contribute an additional percentage to the pension solidarity fund, between 1.5% and 3% depending on their salary, which is higher than today (ranges from 0.5% to 2%). The distribution of the contribution would remain relatively unchanged for the defined benefit component, while in the individual accounts component, 13.2% (up from 11.5%) would go to the individual account and AFPs’ commissions and administrative fees would be limited to 0.8%.
A contributory pillar savings fund will be created, fed by a share of the contributions to both components of the pillar (among other sources) and invested in capital markets. The savings fund will be administered by the central bank, and only be used to finance future pensions paid by Colpensiones, covering the contingent risk from future pension obligations and partially mitigating the financial impact of the reform. One of the main concerns during the debate has been the administration and proper use of the money in this new fund. The Senate, with the government’s support, put administration of the fund in the hands of the central bank (rather than Colpensiones) and added various safeguards against improper political use of the fund.
The reform does not make any major changes to old-age family pensions, disability pensions, survivor pensions or the funeral grant, although disability and survivors’ pensions would now be exclusively paid by Colpensiones.
The reform includes several measures aimed at increasing pension coverage and contributions.
An early old age pension would be granted to those over the age of 65 (men) or 62 (women) with between 1,000 and 1,300 weeks of contributions. The amount would be proportional to the number of weeks contributed, deducting the value equivalent to the missing weeks of contributions.
In recognition of unpaid care work, mothers who do not meet contribution requirements will be able to reduce by 50 weeks per child the number of weeks required to obtain a pension, up to 3 children, or 850 weeks.
Rural workers with seasonal income will be able to contribute for up to 12 months at a time.
Part-time, short-term or self-employed workers will have the possibility of contributing per days or weeks, rather than on a monthly basis.
Parents of dependent children with disabilities would be able to retire at any age if they meet the contribution requirements.
The battle of the threshold
One of the biggest battles of the pension reform, even before it was officially presented, was the salary ‘threshold’ for contributions to Colpensiones. The government’s original text set it at 3 minimum wages, a high level given average salaries in Colombia (in 2022, during the election, Petro’s platform had mentioned an even higher threshold, 4).
Petro is ideologically hostile to private participation in sectors that handle public money—like healthcare, pensions or education. Petro, for example, has previously said that the current pension system is a ‘business’ for the two biggest banks in the country (the financial groups Aval and Sura) and that ‘two bankers’ are enriching themselves while nobody receives pensions.
By setting the threshold so high, almost no one would contribute to private pension funds and would gradually kill them off over time. Only 13% of workers earn more than two minimum wages. The AFPs themselves as well as think-tanks and independent experts all said that the threshold should be lower, most recommending a threshold between 1 and 1.5 minimum wages. In the Senate, an alternative proposal by senator Norma Hurtado (La U), which was voted down, set it at 1.5 minimum wages. The autonomous committee of the fiscal rule (Carf), a group of independent experts that offer non-binding recommendations on public finances, said that “the lower the threshold, the greater the savings in the long-term and the smaller the amount of subsidies to the public system.” Petro and the government, on the other hand, argued that a higher threshold would increase savings and reduce state spending on pensions, reducing the deficit (but would face a higher pension burden in the future).
In the end, the government (labour minister Gloria Inés Ramírez) and independent parties in the Senate (Liberals, La U, Conservatives) reached a compromise to reduce the threshold to 2.3 minimum wages. After the reform was approved in the Senate in April, Petro said that he wanted to raise the threshold to 4, threatening to undo all the work done with his stubborness. In the end, the seventh commission in the House ignored Petro and kept the threshold at 2.3.
Voluntary savings pillar
A voluntary savings pillar would allow additional voluntary retirement savings.
Transition process
Under the transition process spelled out in the reform, anyone with over 750 weeks (women) or 900 weeks (men) of contributions would remain fully covered under the terms of the existing law.
The new system will come into force in July 2025, in just over a year. This is a very quick transition to a completely different system, in which Colpensiones will suddenly assume responsibility for about 17 million new contributors. Senators from different parties proposed a more gradual transition, in 2026, 2027 or 2028, but the Senate finally kept the date for 2025. While Colpensiones claims that it’s prepared and has the capacity to adapt to the new system quickly, not everyone is so sure. Sinttracolpen, the union representing Colpensiones employees, says that Colpensiones isn’t ready.
Controversially, a provision allows AFPs to charge commissions of up to 0.7% for managing all assets they currently hold until the person retires. Some congressmen denounced this huge ‘gift’ to private pension funds, and estimate it could give the AFPs an additional 2.8 trillion pesos annually ($671 million).
The new system: Benefits and challenges
The pension reform will help fix some of the biggest flaws and problems with Colombia’s pension system: expand pension coverage, reduce old age poverty, integrate the different elements of the old system into a pillars system (doing away with the competition between the RPM and RAIS) and reduce the highly regressive subsidies.
The government estimates that, in the first year, the reform will increase pension coverage from 24% to 53.7% (4.6 million people) and will reach a coverage of 87% (13.7 million senior citizens) by 2052. Some critics will object that the reform does this not by expanding coverage of the existing contributory pillar, but rather by giving out subsidies (out of the national budget) to low-income seniors.
The reform also helps to reduce the gender gap in pension access, with measures like the possibility to deduct 50 weeks of contributions per child (so that a woman with three children will require just 850 weeks of contributions to obtain a full pension).
In the short term, the reform improves the fiscal sustainability of the public system. By including all workers in Colpensiones up to a certain level of income, millions of new working-age contributors will pay into the system and, in the short-term, reduce state subsidies to pensions being paid now and reduce the strain on the national budget. The savings fund will build new collective savings, and will guarantee the pension of those who are young today.
The right-wing opposition has spread disinformation about the reform to mobilize opposition to it. Former vice president Francisco ‘Pacho’ Santos claimed that the pension reform would ‘steal’ and ‘expropriate’ people’s retirement savings. On social media, he published the pictures of senators who had voted in favour of the pension reform, ‘wanted’ for ‘expropriating our pensions’ and ‘accomplice to robbery’. In the big anti-Petro protests on April 21, several protesters marched carrying banners with the faces of those senators. 21 senators and the Partido de la U announced legal actions against Pacho Santos for slander, economic panic and instigation to commit a crime. Petro called him a selfish old Scrooge McDuck. Opponents to the reform gathered under the slogan no con mi ahorro (roughly: don’t mess with my savings). The pension reform doesn’t expropriate pension savings—it makes clear that pension money doesn’t belong to the state or the agencies administering it, that money in private pension funds is the property of the individual and the money currently in the RAIS will remain there until the person retires
There are serious concerns about the costs and sustainability of the reform in the long run.
In all, the finance ministry estimates that, by 2070, the entirety of the reform implies an increase in fiscal cost in net present value of 5.5% of GDP compared to a no reform scenario. Up until the 2060s, the only fiscal impact of the reform would come from the additional spending required for the non-contributory pillar. The ministry gave a positive appreciation to the reform, judging it to be fiscally feasible.
According to the Carf’s analysis in November 2023, the non-contributory pillar will cost an additional 0.3% of GDP in the short term (4.3 trillion pesos), coming out of the national budget. The fiscal cost of the semi-contributory pillar will be 0.2% of GDP in 2025, increasing to 0.3% of GDP by 2036. In the contributory pillar, pension contributions will increase, reducing transfers from the government to Colpensiones, creating, in the short and medium-term, some fiscal room. The reform will cost an additional 0.2% of GDP in 2025, increasing gradually until 2065.
The finance minister, Ricardo Bonilla, said that the reform is fiscally sustainable until 2070, while labour minister Gloria Inés Ramírez has said that some ‘adjustments’ will be needed in 12-15 years because of demographic factors. The Carf and finance ministry both estimate that the savings fund will run out in around 2065-2067, which would generate a sudden, additional fiscal burden on the government that’d need to cover the entirety of pension obligations. The Carf estimated that, in 2065, government transfers to Colpensiones will jump from 1.3% to 3.8% of GDP and the total cost of the system will increase to 3.2% of GDP. The Carf’s models, which displeased the government, showed that a contributory pillar with a threshold at one minimum wage would have been the most fiscally sustainable in the long run.
The Carf raised concerns about the long-term fiscal sustainability of the reform. They argued that the increased cost of the pension system in the long-term would general intergenerational inequities, forcing future generations to contribute more to finance the system. Besides the threshold, the committee also criticized reducing the minimum contribution weeks for women from 1,300 to 1,000 (a measure in line with the Constitutional Court’s ruling in 2023), arguing that the provision allowing mothers to discount 50 weeks of contributions for each of their first three children was sufficient to comply with the Court’s decision and less fiscally onerous.
Asofondos, the association of AFPs, which has a vested interest in the status-quo, has said from the beginning that the reform is unsustainable, leaving future generations unprotected and with a huge debt. They add that the savings fund is insufficient, only saves 22 pesos of every 100 pesos contributed). Asofondos points out that some of the advantages of the RAIS will be lost with the reform, like the possibility to retire with 1,150 weeks of contributions or only by capital savings with no qualifying conditions.
Vicky Dávila, the fiery and pugnacious director of right-wing news portal Semana, accused the president of Asofondos of ‘lobbying’ for the reform in the House and meeting with the president of the House, petrista Liberal Andrés Calle, in exchange for the 0.7% commission that AFPs will be able to charge to keep managing the funds they hold. She angrily accused them of making deals with Petro to defend their own interests. In a statement, Asofondos accused Dávila of making false and slanderous accusations.
The ANDI, the employers’ association, is also concerned about the financial cost of the reform, future demographic trends (aging population) and the impact on capital markets (AFPs today are the second-biggest holders of Colombian government bonds and have contributed to the development of big infrastructure projects). They say that the reform has laudable goals (increasing coverage), but does little to increase contributions to the system.
While most of the big gremios (sectoral associations and lobbies) like ANDI, Asofondos and others opposed the reform, Fasecolda (the association of public and private insurers) supported the reform. Insurers manage pensioners’ money (annuities) and they’ll be in charge of managing payments of disability and survivors’ pensions.
The reform does not address long-term issues. While Colombia isn’t yet facing demographic pressures like Europe, it has an aging population—according to population projections, the population over 60 will increase from 14% in 2020 to 36% in 2070. Various experts and academics have proposed raising the retirement age (which is currently quite low), but that’d assuredly be an unpopular and politically costly measure like everywhere else. In January 2023, after Petro’s first finance minister José Antonio Ocampo publicly said that the government hadn’t ruled out raising the retirement age, Petro quickly tweeted that he’d rather resign than raise the retirement age.
Furthermore, the reform doesn’t modify Colpensiones’ rather generous replacement rate. Although the reform reduces subsidies to big pensions, the positive effect will be cancelled out by extending remaining subsidies to all pensioners in the country, particularly once the savings fund runs dry. The Carf and the fiscal observatory of the Javeriana University had both proposed modifying the replacement rate.
Finally, the reform doesn’t touch the very costly and heavily subsidized special regimes.
By adopting the Senate’s text without modification, the final text of the law includes some minor but quite controversial proposals. First, likely because of an oversight or ‘mistake’, according to the final text all pensions above 1,000 tax units (around 47 million pesos a year, or 3.6 million pesos a month with 13 payments) would be taxed. The House, in third debate, corrected this ‘mistake’ to make clear that only pensions above 1,000 tax units monthly would be taxed (as is currently the case). In reality, at current tax rates, relatively few pensioners would end up paying more in taxes, and the issue of taxing big pensions needs to be discussed seriously. However, this provision came in through the backdoor (and is probably unconstitutional), and the issue of taxing pensions is politically toxic in Colombia (Petro’s 2022 tax reform initially wanted to tax pensions over 10 million pesos a month but the proposal was killed in Congress), in part because those who’d be affected (the 16,000 or so pensioners getting over 10 million pesos a month) are disproportionately influential and prominent in public debate.
Secondly, the final text includes, nearly at the end, an article giving ‘differential treatment’—lower retirement age and contribution weeks requirement—for indigenous, Afro-Colombian and peasant communities because of their lower life expectancy. This provision came in as a last minute amendment to the text in the Senate, by indigenous senator Richard Fuelantala. Critics say it creates a separate pension system for up to 40% of the country, and is poorly written.
Responding to these two issues, interior minister Luis Fernando Velasco has said that the government may present a new bill to ‘correct’ three or four issues, including taxation of pensions and differential treatment for minorities.
Conclusions
As I wrote at the beginning of this post, the pension reform is a major victory for Petro, who hasn’t had many victories at all in the past few months, as he reaches the halfway point of his term. After the failure of the healthcare reform and being forced to start the labour reform from scratch last summer, the pension reform is Petro’s only big socioeconomic reform to see light of day so far. This victory dilutes Petro’s radical anti-establishment ‘constituent process’ rhetoric a bit. Indeed, Petro said that the reform’s adoption opened the door to a ‘national agreement’ again (Petro has been talking about one, on and off, since 2022).
Unlike with the healthcare reform, where the government remained largely inflexible and unwilling to make compromises with other parties until the end, with the pension reform, a more conciliatory and capable labour minister, Gloria Inés Ramírez, was willing to make some key concessions to other parties, like on the famous threshold or management of the savings fund, to get the bill through. Petro himself tried to scuttle the progress made when he called on the House to raise the threshold to four, though they ultimately ignored him and he didn’t insist further. This proves that, not without difficulties, Petro’s administration can still pass its agenda through Congress—if it makes concessions and is ready to meet others halfway. That being said, only a few days after the pension reform’s adoption, the government’s education reform died by failing to be adopted in its fourth debate in the Senate.
The pension battle isn’t over just yet, though: the Constitutional Court will need to rule on the challenges against the new law.