Details of Pension Reform Legislation

UNCLAS BOGOTA 005017 SIPDIS E.O. 12958: N/A TAGS: PGOV EFIN CO SUBJECT: Details of Pension Reform Legislation ¶1. Background: Approximately 6.1 million Colombians receive some sort of public pension assistance. In 2003 COP 5.6 trillion (USD 2.4 billion) went towards the public pension system. In 2004 the number increased to COP 6.7 trillion (USD 2.9 billion). However, while GOC is forced to allocate more money to the public pension system, the program's revenues are declining. In 2003 the pension system received COP 2.2 trillion (USD 943 million) and only COP 1.9 trillion (USD 815 million) in 2004. This system cannot sustain itself without some drastic changes. The proposed pension reform bill has passed 6 of the 8 Congressional debates. Two debates in the Senate remain before the law can be amended to the Constitution. The following lists the most noteworthy reforms, most of which would apply only to those who retire on or after August 1, 2010: ¶2. Retirement age to rise: Effective July 31, 2010, Colombia's official retirement age would rise from 60 years to 62 years for men and from 55 to 57 years for women. There is an exception for workers who have a minimum of 15 years of service by July 31, 2010; their transition period would end in 2014. ¶3. 14 monthly pension payments drop to 13: Previously those people who were eligible for public pensions received 14 payments throughout the year. The bill would eliminate one of those fourteen pension payments for all retirees. This provision is effective immediately upon passage for new retirees, but will not affect current pensions. ¶4. Fewer privileged groups: The current pension system is loaded with exceptions for diplomats, congressmen, oil workers, and others. Excepted groups were allowed early retirement and/or increased pension payments. The new pension bill would eliminate most of these privileges by August 1, 2010. Only the president of Colombia and those who served in the military would be granted exceptions to the pension regime. ¶5. Pension ceiling: Currently, 90 percent of those people receiving pensions only obtain payments which are 1-2 times the minimum wage (approximately USD 80-160 a month). Many high level government officials receive pensions which are much higher than the rest of the population. Beginning in August of 2010, a pension can be no greater than 25 times the minimum wage. ¶6. Comment: Colombia's pension reform legislation is now in the hands of the Senate, which has until June 24 to pass the bill through committee and a final plenary debate.