Cablegate: Details of Pension Reform Legislation

This record is a partial extract of the original cable. The full text of the original cable is not available.

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.

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