Colombia: Proposed reforms to the national pension system

Employer Action Code: Monitor

Congress is considering legislation to reform Colombia’s public pension system. The existing system allows members to choose between a state-run defined benefit plan (Régimen de Prima Media – RPM) and an individual defined contribution savings account plan (Régimen de Ahorro Individual con Solidaridad – RAIS) managed by private pension fund administrators (Administradoras de Fondos de Pensiones – AFPs). If approved, Bill 293 on the Comprehensive Social Protection System for Old Age would establish three state benefit pillars, which would replace the RPM and RAIS plans, complemented by a fourth voluntary pillar for higher-income earners.

Key details

The four pension pillars would be:

• Solidarity pensions: Low-income individuals age 65 or older with little to no accrued pension benefits would be eligible for a basic retirement income equal to the “extreme poverty line” (as published by the National Statistics Office) estimated to be around 223,000 Colombian pesos (Col$) per month, almost three times higher than the current solidarity pension of Col$80,000 per month.
• Semi-contributory pensions: Individuals with some contributory pension participation (see below) but who are unable to retire at normal retirement age (62 for men/57 for women) because they do not have the minimum 1,300 weeks’ insured employment would be able to claim partial contributory benefits, possibly supplemented by solidarity pension benefits.
• Contributory pensions: Employees would contribute to a state pension fund on earnings up to three times the monthly minimum wage (MMW) and contribute on earnings above this threshold (if any) to individual defined contribution accounts managed by AFPs. Benefits would be combined as a single pension at retirement. Normal retirement age and most existing eligibility requirements would not change except that the minimum number of weeks of insured employment required for women with children would be reduced by 50 weeks per child (subject to a maximum of 150 weeks). Employer and employee contribution rates on earnings up to four times the MMW would not change from current rates (12% for employers and 4% for employees), but the employee contribution rate on earnings in excess (if any) would increase to 6% to 7% on pay up to 25 times the MMW (the current earnings ceiling) to fund the solidarity pension.
• Voluntary pensions: Optional individual or collective savings plans would be introduced to complement the state pension for higher-income individuals, funded by additional employee contributions.

Individuals with 1,000 or more weeks of insured employment would continue to receive a pension based on the existing RPM/RAIS system. Death and long-term disability pensions would be largely unchanged in terms of eligibility and benefits provided, except that the state pension agency Colpensiones would assume responsibility for administering all benefits for the first three pillars.

In a related development, the government confirmed it is developing legislation in response to a recent Constitutional Court ruling that the requirement for women to have 1,300 of weeks of insured employment (the same as men) in order to claim a RPM pension is a form of indirect discrimination. The court set a deadline of January 1, 2026, for the government to pass legislation addressing the ruling.

Employer implications

The bill would establish a meaningful minimum pension level for all Colombian citizens, partially funded by increased contributions from employees earning over four times the MMW. It would also greatly reduce the role of the AFPs in managing and providing retirement benefits, replaced by state management. Few surveyed companies (9%) offer supplemental retirement benefits to their employees, and the bill does not provide any incentives that would encourage more companies to do so.