Colombia is restructuring its pension system into a four-pillar system, comprising a solidarity program, semi-contributory program, contributory program and a voluntary program, with effect from 1 July 2025. The new system is intended to expand old-age income support for more Colombians.
Background
The pension reform bill was passed by Congress in June 2024 and the new system is expected to take effect on 1 July 2025. The first regulation under the pension reform was issued as a decree on 3 October 2024, with more regulations expected to be issued prior to 1 July 2025.
Starting 1 July 2025, the new system will initially apply to men with fewer than 900 weeks (approximately 17.26 years) of contribution and women with fewer than 750 weeks of contributions (approximately 14.38 years) as of 1 July 2025. Men with at least 900 weeks of contribution and women with at least 750 weeks of contribution on 1 July 2025 will continue to be covered under the current pension system. However, those within 10 years of the retirement age of 62 for men or 57 for women as of 30 June 2025 will be required to switch to the new pension system by 16 July 2026.
Key details
Contributory program
Under Colombia's current system (Law 100 of 1993 (opens a new window)), employees must choose to enroll in either a defined benefit pension plan (Regimen de Prima Media or “RPM”) managed by the Colombian Pension Administrator ("Colpensiones”) or an individual savings defined contribution plan (Regimen de Ahorro Individual con Solidaridad or “RAIS”) managed by private pension administrators. Employees can only enroll in either RPM or RAIS, and not both concurrently. Contributions under each plan must be made on monthly earnings up to 25 times the monthly legal minimum wage (“SMLMW”) (COP 1,423,500 in 2025).
The pension reform restructures the system such that the new contributory program will comprise a public component and a private component.
Average Premium Component: For all employees, regardless of their level of monthly earnings, contributions must be made:
to the public pension fund
on monthly earnings up to 2.3 times the SMLMW
Individual Savings Complementary Component: For employees earning more than 2.3 times the SMLMW, contributions must additionally be made:
to an individual savings account managed by a private pension administrator
on excess monthly earnings above 2.3 times the SMLMW and up to 25 times the SMLMW
Employers and employees must pay mandatory contributions for both components if the employee earns more than 2.3 times the SMLMW.
If the employee earns 2.3 times the SMLMW or less, contributions only need to be paid for the public Average Premium Component.
The table below sets out a comparison of other key details between the current system and the new system.
Current System | New System | |
Contribution rates on monthly earnings (The additional contributions are intended to finance social assistance benefits, including the solidarity pension.) | Employers: 12% Employees: 4% + for employees who have monthly earnings of at least four times the SMLMW, an additional contribution rate of 1% to 2% based on income level | Employers: 12% Employees: 4% + for employees who have monthly earnings of at least four times the SMLMW, an additional contribution rate of 1.5% to 3% based on income level The above rates apply to all contributions, regardless of whether the contributions are paid under the Average Premium Component or the Individual Savings Complementary Component. |
Payment of pension benefits | Paid under the employee’s single pension plan, whether RPM or RAIS: RPM Payable monthly RAIS Payable as an annuity, programmed withdrawal or a combination of a programmed withdrawal and deferred lifetime annuity | To be paid as single monthly old-age pension through a combination of the settlement income under the Average Premium Component and the value of the contributions, financial returns and any pension bond under the Individual Savings Complementary Component |
Requirements to qualify for old-age pension | RPM Age: 62 for men, 57 for women Minimum weeks of contribution: 1,300 weeks (approximately 24.93 years) RAIS Any age provided that the capital accumulated in the individual savings account allows the contributor to obtain a monthly pension greater than 110% of the SMLMW For a contributor with at least 1,150 weeks (approximately 22.05 years) of contributions, if capital required for a pension equivalent to the SMLMW is not accumulated by age 62 for men and 57 for women, a minimum old age pension equivalent to the SMLMW is guaranteed by the government | Old-age pension Age: 62 for men, 57 for women Minimum weeks of contribution for men: 1,300 weeks (approximately 24.93 years) Minimum weeks of contribution for women: 1,275 weeks (approximately 24.45 years) in 2025 and will decrease by 25 weeks a year until it reaches 1,000 weeks (approximately 19.18 years) in 2036 Partial old-age pension Age: 65 for men, 62 for women Minimum weeks of contribution: 1,000 weeks (approximately 19.18 years) Reduction of minimum required weeks for mothers Mothers will be able to reduce the minimum required weeks of contributions to qualify for an old-age pension by 50 weeks per child, up to a maximum of three children. |
Semi-contributory program
The semi-contributory program will apply to individuals who do not meet the requirements for the contributory old-age pension.
Under the new system, contributors who do not qualify for an old-age pension and have at least 300 weeks (approximately 5.75 years) and less than 1,000 weeks (approximately 19.18 years) of contributions by age 65 for men or age 60 for women will receive a monthly semi-contributory old-age pension, in the form of a lifetime annuity based on their contributions, and a government subsidy of 20% for men and 30% for women on the Average Premium Component. However, the maximum monthly semi-contributory old-age pension will be 80% of the SMLMW.
Individuals with up to 299 weeks (approximately 5.73 years) of contributions who do not qualify for the semi-contributory old-age pension will be entitled to a refund of their contributions as a lump sum. For the Average Premium Component, the compensation will be based on the number of weeks contributed. For the Individual Savings Complementary Component, they will receive the capital accumulated in their individual savings account, including financial returns and the value of any pension bond.
Solidarity program
The solidarity program under the new system will apply to individuals who do not qualify for a contributory or semi-contributory old-age pension if they meet the following requirements:
They have reached the age of 65 for men or 60 for women (these eligibility ages will be reduced by five years for individuals who have disabilities with at least 50% reductions in their work capacities).
They are not receiving any other pension.
They have resided in Colombia for at least the last 10 years.
They are classified as being in extreme poverty or vulnerable by the government.
These individuals will receive a monthly solidarity pension that will be at least the extreme poverty line (COP 223,000 per month in 2024).
Voluntary program
The voluntary program consists of optional and additional retirement plans based on mechanisms that exist in the financial system that are designed, offered and managed by private providers for individuals who wish to make additional contributions. The pension reform law does not set out a new regime or structure for these voluntary retirement plans. These are widely available on an individual or collective (e.g. through an employer) basis and have a range of potential features, such as custom contribution amounts or the ability to withdraw contributions after a certain period of time rather than at retirement.
Employer Action
The changes in the contributory program are significant for individuals as covered employees who are currently enrolled in private pension plans will start contributing to the public pension fund from 1 July 2025 and covered higher-income employees who have previously opted to contribute to the public pension fund will also start contributing to private pension plans from 1 July 2025. Additional regulations and regulatory guidance for the implementation of the restructured pension system are expected to be released.
Employers may wish to note that there is no change in the basic contribution rates on monthly earnings, which remain the same at 12% for employers and 4% for employees. However, there will be increases in the additional contribution rates that apply for employees who have monthly earnings of at least four times the SMLMW. From 1 July 2025, these will increase to 1.5% to 3% (previously 1% to 2%) based on income level, and payroll systems should be adjusted for these increases.
Please contact your Lockton Consultant if you wish to discuss these changes or the potential impact on the retirement benefits, financial planning, and financial education currently offered to your employees.
Pension Reform Law 2381 of 2024 | Civil Service (opens a new window)
Pension Reform Decree 1225 of 2024 | Civil Service (opens a new window)
