The reality of pensions in Colombia

According to Law 100 of 1993, the Comprehensive Social Security System in Colombia ensures that it guarantees a quality of life commensurate with human dignity, as individuals and the community can have rules and procedures for labor protection and social assistance.

Similarly, Law 100 of 1993 lays down legislation with four general aspects

  • The General Pension System
  • The General Health Social Security System
  • The General System of Professional Risks
  • Complementary social services

In this case, in the General Pension System, it is stated that the objective is to ensure that the population is covered by the risks or contingencies arising from old age, disability and death, through the recognition of pensions and benefits determined by the Law. This system also seeks to expand the coverage to segments of the population not covered up to that time by the old System.

With this Act, a permit emerged to establish Pension Fund Management Societies, whose function is to manage resources to pay the pensions of members who choose to pension in accordance with the conditions under which these funds operated, in accordance with the provisions required by Law 100. It also regulates and authorizes the management of the pension scheme managed by the Social Security Institute and by which a fixed pension percentage is recognized in accordance with the compliance with age and time-quoted requirements.

The Pension Fund Management Societies and Cesantías in Colombia are: Pensions and Cesantías Protección, Porvenir S.A.; Skandia, ING Pensions and Cesantías, Citi Colfondos and BBVA Horizonte. These financial institutions are supervised by the Colombian Financial Superintendency, whose sole purpose is the administration and management of funds and pension plans of the individual savings scheme with solidarity and injunction funds and are responsible for manage money to pay for members’ pensions.

Likewise, these entities are engaged in the administration of the cessation, which is the social benefit that every employer must recognize to its workers in order to meet their primary needs in case it becomes inorcable.

In Colombia, it operates the regime of media premium, a public system that is managed by the Social Security Institute, ISS, and financed by the State. Today there are 1’247,145 Colombians who enjoy a pension from the ISS. But what not all of those “benefited” by this regime do not know is that at present, the payments of current workers are not directed at their real savings, but at pension payments of people who retired years ago, because previous governments do not they saved that money and it was the beginning of the pension derailment that will be presented, or rather, to announce in a very short time.

In short, today’s workers are unaware that when they get old, if they arrive, their longed-for savings do not exist and there will be no young workers paying their pensions, as they are doing right now with the old.

There are also private fund managers who operate on the individual savings of each Colombian and their pension depends on their own contribution. There are now 43,516 people retired under this regime.

But, going back to the beginning of this essay, “the million-dollar question” arises: human dignity? All this synthesis that describes the General Pension System and the handling stipulated by Law 100, belongs to one of the many sci-fi stories of our Political Constitution.

Quality of life in keeping with human dignity? Is it that a decent quality of life is to pension at 55, in the case of women, and at 60 years, for boys? Considering that the average lifespan of a Colombian male sex is 70 years and female, 77 years old? Is it worth working as a slave more than 8 hours a day every year of existence to enjoy, if any 10, when you are already diabetic, disabled, deaf, blind, without memory and with all possible health problems? Quality of life in keeping with human dignity?

It seems that the Colombian Government believes this, and even considers that it is still “too young” at these ages to receive the pension.

Therefore, at the beginning of this year, exactly on January 30, to secure Colombia’s fiscal future, the National Association of Financial Institutions, Anif, warned that the retirement age of Colombians should be raised and that this aspect should become the cornerstone of pension reform.

“If this is not the case, this reform will hardly achieve the historical relevance required to avoid Colombia’s pension derailment in the not too distant future,” stresses a report by the Association. According to the entity, the adjustment should be for women aged 62 and 65 for men. Will there be anyone who believes in pensions?

Are we getting close to a “financial pen”?

This reminds us of the serious crisis that Argentina faced, when panic invaded the people, who saw that banks closed their doors in the face of the government’s announcement, pressed by pension derailment, to limit the weekly amount that could withdraw each citizen from his bank account to stop capital flight, a move that became popular as a financial ‘corralito’.

At that time, in 2001, the IMF decided not to provide a $1.26 billion loan in the face of non-compliance with Argentina’s fiscal targets. The World Bank (WB) and the Inter-American Development Bank (IDB) froze loans of 1.23 billion euros. Former Minister Domingo Cavallo extended to 1,000 pesos a week the amount of cash that Argentines could take out and to 10,000, the maximum they could get out of the country. The next day, the official admitted that the country had entered into a “virtual” default and moved urgently to Washington to negotiate with the International Monetary Fund to grant the loan. He didn’t make it.

On 13 December of that year, the general strike exploded in Argentina against unpopular banking restrictions. Five days later, a violent wave of supermarket rantes erupted and violent protests erupted. The government declared the state of siege.

What will be our future, for this is a declared time bomb?

The reality of pensions in Colombia
Source: Education  
June 30, 2019

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