Colombia pension reform will face further challenges

Significance The bill’s content was watered down during debate, with the earning threshold at which payments into private pension funds are permitted lowered and the Central Bank granted a governance role in the system. The manner in which the bill was passed was also highly controversial. Its approval nevertheless marks one of Petro’s greatest legislative victories. Impacts Colpensiones will receive COP2.3tn (USD555mn) for administration fees, 65% more than the COP1.4tn now received by private pension funds. The reform will reduce the fiscal deficit in the short term, and create a medium-term gap in the pension fund savings stock. Financial markets will probably react positively to the reform, considering the short-term improvement to the fiscal deficit.