Considerations on the Subject of Retirement in Colombia.

In addition to Colpensiones and private retirement funds, there are other pensioners in Colombia that are 254.000 official teachers, 281.000 military, 333.000 in Cajanal and Fopep, and 29.000 in other special regimes, according to official and private information.

In the case of Colpensiones there are 1.490.794 and in private retirement funds 247.000. It can be observed that the latter are already in number close to those of the official teachers and the military, who are special regimes that are not going to be included in the retirement reform. Neither are other special ones such as the Presidency, the Courts and the Congress of the Republic.

Matter of a retirement reform is only what concerns Colpensiones and private retirement funds, but in the case of Colpensiones, 11 billion pesos are allocated from the National Budget (the entity contributes 10 billion pesos from its contributions received ) while for private funds nothing. The military takes 10 billion from the nation's budget, the teachers 8 billion, Cajanal 8 billion, the specials 5 billion, all of which adds up to 43 billion pesos. If Colpensiones is removed from this, it turns out that there are 32 billion that come out of the Budget to pay pensions that will not be subject to the announced reform.

Currently, the number of Colpensiones pensioners is 6 times more than in private funds, a situation that will remain for about 20 years since the average age of contributors in private funds is 35 years and the first to retire en masse will be their women. In other words, the savings that currently total around 350 billion pesos will be maintained and grow during that period of time. It will be another 20 years compared to the 30 that private funds have been in operation. That would only change if a retirement reform modifies it.

The retirement reform is motivated because according to private and official sources, in Colombia there are 6.4 million adult inhabitants over 60 years of age, of whom only 1.7 million receive a pension, coverage is low. Also, a program for the elderly grants a monetary transfer of 80.000 pesos per month to another 1.7 million of them. The remaining 3 million receive nothing and the reform is expected to grant them a solidarity pension (a solidarity pillar) even if they do not have age requirements or weeks of contribution and that they belong to the sisbén. Regarding this, it is worth mentioning that the returns of savings at retirement age but without reaching the right to a pension were 740.000 in Colpensiones and 231.000 in the private sector in a period from 2.013 to 2.020 with a higher interest rate in the private sector than in the public sector.

In addition, there is an informality of work for 58% of the country's workers, according to official sources, who do not contribute to a pension, for which a labor reform is required that makes formal hiring more flexible, but in addition to a greater commitment from the private sector in the generation of new jobs. Correcting informality is key to increasing pension coverage in the population, which, as mentioned before, only 26% of adults over 60 years of age have a pension.

Most of the pensioners in Colombia belong to Colpensiones, as was stated at the beginning of this note, and they represent 56% of the total, and of this total, 54% receive a pension equivalent to one minimum wage and 24% receive two. The highest pensions belong to those with more than 20 minimum wages and are 169 citizens and between 10 and 20 minimum wages to 15.511 of them. Regarding this issue, it is also observed that the Nation's Budget covers or subsidizes higher pensions more than those with minimum wages.

In Colpensiones there are 6.8 million affiliates of which 78% contribute to a minimum wage and only 40% of those affiliates made any payment in the last month to cover their pension contributions. They are only a part of the total those who are quoted.

The private system of retirement funds, as mentioned before, does not require resources from the nation's Budget, but rather depends on the savings of its affiliates who, for the moment, are on average more than 20 years away from massively retiring, but a pension reform in consensus must grant a solidarity pension to older adults who did not reach a pension and are in poverty. The inconvenience that can also be discused is about taking from the private pension savings contained in the pension funds through transfer to Colpensiones of the affiliates to make these monetary transfers to those without a pension in exchange for internal public debt securities such as TES redeemable in the future to cover their pensions in Colpensiones.

Likewise, the nation must continue to cover from its Budget the other pensions mentioned as official teachers, military, Cajanal, Fopep and those of special regimes that are added three times greater than the contributions of the Budget for Colpensiones as shown before at the beginning of this note.

In order to release more budget resources tied to pensions and allocate them to social programs such as health, education and housing or road infrastructure and land for agriculture, the pensions listed in the previous paragraph would have to be modified, which is hardly feasible (it is about official teaching, military and special regimes) it is more plausible to allocate resources for those objectives with the next tax reform, of several that are required in the next 10 years, with which poverty and inequality will also be reduced a little more towards levels that are more in line with the OECD countries, a process that just started the reform carried out last year and which came into force this year.

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Today ( tuesday february 28) regarding the world markets, the stock markets behave mixed, mainly in Europe due to expectations regarding increases in the interest rate of the central banks due to monthly inflation records equal to or higher than expected.

The price of oil rises awaiting increases in world demand, especially from China. WTI and BRENT register 76.8 and 83 dollars per barrel respectively.

In Colombia, at mid morning the peso appreciates slightly to 4.793 per dollar against the TRM for today of 4.808.