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A new initiative, this time of parliamentary origin, which revives the possibility for thousands of Colombians who save for their pensions, both in private funds (AFP) and in Colpensiones, to change their regime, once again turned on the alarms in several sectors both because of the billionaire effects that this would have on public finances (77.6 trillion pesos) and on the financial markets.
It is about Bill 050 of 2019 of the House of Representatives and 322 of 2020 of the Senate, whose discussion is resumed this Tuesday by the Seventh Committee of the Senate and that leaves the door open so that in a period of six months, once the law, Those who have contributed at least 750 weeks for their pension (women over 50 years old and men over 52 years old), change their regime.
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Calculations by Asofondos, the private funds union, indicate that under these conditions, about 518,000 of its members could move to Colpensiones, but only about 113,000 would benefit from this alternative, while 202,623 would not be able to retire in the public regime.
Although this would represent resources for the State of about 42 billion pesos, which would go from the AFP coffers to those of Colpensiones, In the long term, it will generate an enormous cost to public finances of 77.6 trillion pesos when it has to respond for pensions, subsidies or the return of resources for those who do not reach retirement.
“With that figure, 2,560,000 adults over 65 could be lifted out of poverty,” said Santiago Montenegro, president of Asofondos, during his speech last week at the Pension Window Forum, organized by the Seventh Committee of Congress.
With this figure, 2,560,000 adults over 65 could be lifted out of poverty
“If only those who are convenient for them (113,161 people) are transferred, the cost for the Government is 64 billion pesos in subsidies. An average of 573 million subsidy per person ”, he added.
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Although the fiscal impact is not a small thing, analysts consider that the most significant damage is that a good part of these subsidies (about 50 billion pesos) go to the highest pensions, which is very inequitable.
Although some academics and union spokespersons who participated in said forum agreed that the Colombian pension system suffers from serious equity, coverage and financing problems, they also agreed that this initiative does not solve those structural flaws and, therefore, they see it as a regressive project , inconvenient in terms of distribution, efficiency, generational inequality, as it would generate greater social inequality.
César Tamayo, dean of the Eafit School of Economics, said that although the project seeks to amend the problem of the absence of double counseling, it could end up being detrimental to a group of people who might have a greater chance of retiring or receiving a higher pension in the individual savings scheme with solidarity (Rais).
For his part, Miguel Gómez Martínez, president of Fasecolda, recalled that 75 percent of the subsidies go to quintiles 4 and 5 of the population and the project does not attack this regressivity, but rather aggravates it by allowing more people to go to the public system and receive a higher subsidy.
Another of the great problems that the initiative would bring is related to the investments that the AFPs have, because in order to transfer the resources of the affiliates that go to Colpensiones (about 42 billion), they will have to sell their assets, which would make the prices, warned Francisco Azuero, a professor at the University of Los Andes.
“The falls we witnessed in the financial markets in March would be child’s play compared to what it would mean for pension funds to have to massively sell financial securities in order to deliver the resources,” he said.
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The government does not find the initiative convenient either, and so Juan Pablo Zárate, technical vice minister of Finance, told José Ritter López, president of the Senate’s Seventh Permanent Constitutional Commission in a letter sent at the end of last July.
The Government estimates the cost of transferring 221,000 AFP members to Colpensiones at about 60 billion, but these people would transfer their savings to 27 billion, with which that cost would be reduced to about 28 billion.
The Government estimates that it would cancel the issuance of pension bonds for 7.9 billion pesos, but, since Colpensiones would leave some 145,000 affiliates heading to the AFPs, this would imply issuing bonds for 3.5 billion.
That is why in his letter he refrained from issuing a favorable concept of the project and requested “Study the possibility of its file”, as it considered that it does not know the principle of financial sustainability of the General Pension System contemplated, among others.
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