Pension contributions will not be saved: 80% can be used immediately to finance Colpensiones pension payments.

The possibility that a good portion of the contributions people make to their pensions today will be used to finance monthly payments under the average premium system (Colpensiones), with the changes introduced by Law 2381 of 2024—still under review by the Constitutional Court—continues to be a major concern for various market sectors, since this mechanism puts the sustainability of the system at risk, as it will generate a liability that could cost up to 160 percent of the gross domestic product (GDP).

If this law, which introduces substantial changes to the Colombian pension system, passes the High Court's scrutiny, once it comes into force, a point that the same court will have to decide—initially scheduled for July 1, 2025 —the resources that will begin to flow into the Average Premium Regime (RPM) or Colpensiones will be significant.

As a reminder, the reform establishes that all pension contributions of up to 2.3 times the minimum monthly wage—approximately 3,274,000 pesos this year—will be required to pay into the RPM (Revolutionary Social Security System), and contributions above that threshold will be administered by the currently authorized Individual Savings Supplementary Component Administrators (Accai): Porvenir, Protección, Colfondos, Skandia, and Positiva Seguros.

Thus, it is estimated that Colpensiones will receive around 3 billion pesos each month, of which about 80 percent—some 2.4 billion pesos—will be used to finance monthly payments under the average premium regime (RPM) , and only 20 percent will go to the Contributory Pillar Savings Fund (Fapc), which will be managed by the Bank of the Republic.

"In a fully sustainable system, all contributions would be saved, but since this isn't our case, where a portion is spent on paying current pensions, this creates a liability that will eventually be worth 160 percent of GDP," says Andrés Mauricio Velasco, president of Asofondos, the private fund association.

He explains that this stems precisely from the fact that not all of people's contributions are saved, but also because what is ultimately paid out is much more than what was contributed.

Now, since the government hasn't saved the pensions for those who are retiring today—as of April 2025, Colpensiones had nearly 1.8 million pensioners—finding the funds to cover those pensions each month is almost impossible.

The expert says that this is bad but necessary, although it could be better, since of the approximately 2.3 points of GDP that should be saved, only 0.5 points are being started with and 1.8 points are being spent, but these were the parameters that remained in the law (Article 24).

This article establishes that the pension contribution income received by the Average Premium Component of the Contributory Pillar will start at 1.8 percent of GDP in the first three years (2025-2028), will drop to 1.6 percent for the 2029-2035 periods, then to 1.4 percent between 2036 and 2040. They will be 1.2 percent for the 2041-2050 periods and will stabilize at 1 percent of GDP starting in 2051.

As part of the funds that will begin to flow to the RPM if Law 2381 is approved by the Constitutional Court, they will be administered in the Contributory Pillar Savings Fund (Fapc) managed by the Bank of the Republic. Its manager, Leonardo Villar, has been insisting on the need for clarity regarding the timing of the entry into force of said regulation, given that it is not only necessary to advance in the signing of some contracts for the management of the funds but also to carry out fundamental technical tests.

At the last Banking Convention, the executive stated that the bank's challenge in this regard is enormous, as they must "move forward with the signing of an inter-administrative contract between the government and the Bank of the Republic to begin the selection and hiring process for the delegated administrators of the resource portfolios," which they will begin receiving once the law comes into effect.

In this regard , the Issuer's manager requested the Constitutional Court, through a letter sent last Wednesday, to consider the possibility of postponing the entry into force of the pension reform until at least three months after the publication of the ruling declaring its constitutionality.

This is because this would be the time required to reactivate and implement the operational and contracting procedures that the entity must carry out as administrator of the Fapc. These processes can only be carried out if Law 2381 is approved for review by the High Court. These procedures are key to adjusting the mechanisms for receiving and transferring pension funds for millions of Colombians.

Asofondos had already submitted a similar request to the court that same week. In its letter, the union argued that it is essential for all stakeholders in the system to have a clear date from which the law will enter into force and that this period must be reasonable to complete the regulatory, operational, and technological tasks that were suspended by the high court's decision.

Based on the above, he proposed that the court establish in its ruling that the suspended regulations begin to take effect again on the first calendar day, two months after the Court's ruling.

Various sectors have been insisting on the need to protect the pension savings that millions of Colombians have accumulated over decades and which today total nearly 550 billion pesos. This includes the balance of the Minimum Pension Guarantee Fund (Fgpm), managed by private funds (AFPs). As its name suggests, these funds are intended to supplement the minimum pension of those whose savings are insufficient.

"It's key to protect the Fapc and the Fgpm," insists Velasco of Asofondos, who believes that any use of resources from the Contributory Pillar to finance expenses, for example, the semi-contributory pillar, will generate a deficit. If the funds from that guarantee fund are used to finance RPM pensions, this will lead to the depletion of resources intended to pay 100 percent of minimum pensions under the Individual Savings with Solidarity Scheme (Rais).

All AFP members contribute to this guarantee fund. Of the 16 percent they contribute to their pension, 11.5 percent goes to their individual account, 1.5 percent to the FGM, which is a common fund for that system, and the remaining 3 percent goes to pension insurance (2.5 percent) and the AFP administration fee (0.5 percent).

The problem is that Decree 514 of 2024, which regulates the pension reform, states that Fgpm resources may be used to finance RPM pensions, which is inconvenient because these resources are designed to guarantee the minimum pensions of those who cannot complete that amount with their savings. Therefore, the insistent call from entities such as Asofondos and the economic research center Anif is for these funds to be protected and not used for purposes other than those originally intended.