Complementary pensions (Mandatory)
2020: Decree 1207. Related to voluntary pension funds.
2020: Decree 1393. Modified the investment regime of the pension funds.
2018: Decree 1486. Created the limit for the investments made in securities issued by entities that belong to the same financial conglomerate which cannot be higher than 8% of the fund's value, including deposits.
2018: Decree 059. Changed the investment regime of the Programmed Retirement Fund, allowing the investment in REITs, Collective Investment Schemes that invest in real estate and Private Equity Funds, among others. It modified the calculation of the Minimum Return for this type of fund, changing the accumulative period and the procedure, as well. This Decree also allows that up to 30% of the fund's portfolio can be valued at amortized cost and the rest at reasonable value.
2016: Decree 765. Modified certain investment classes of the investment regime, including new kinds of allowed asset classes such as REITs, ETFs linked to commodity and currency prices and CIS that invest in real estate and hedge funds, also including the investment limits of such investments. The Decree also restricted investments in other asset classes.
2015: Decree 1385. Allowed investments in Private Equity Funds issued, accepted, guaranteed or owned by the PFM, its subsidiaries, HQs or affiliated companies if those investment vehicles allocate 2/3 of the fund's value in infrastructure projects as established under Decree 816 of 2014.
2014: Decree 816. Created an alternative to invest in private equity funds that invest 2/3 of the fund's value in infrastructure projects under private-public associations.
2013: Decree 1242. Regarding the investment in collective investment schemes.
2011: Decree 857 (Incorporated into Decree 2555 of 2010), introduced investment regime of the resources of the mandatory pension funds and also for the severance payment funds.
2010: Decree 2949 of 2010 (Incorporated into Decree 2555 of 2010), introduced calculation of the minimum return for the different mandatory pension plans, as well as for the short and long term portfolios of the severance payment funds.
2010: Decree 2241 of 2010 (Incorporated into Decree 2555 of 2010), introduced rules of consumer protection of the members of the pension system.
2010: Decree 2373 of 2010 (Incorporated into Decree 2555 of 2010), introduced the multi fund scheme for the resources of the mandatory pension funds.
2009: Law 1328 of 2009, introduced the regime of information and protection of the members and new fees regime. The periodic economic benefits and programmed savings managed through financial entities will be the vehicle for the construction of assistance for the old age that are not part of the benefits payment.
2005: Legislative Act 01, eliminated special regimes (only special pension regimes for public force, the president, teachers and high risk occupations were preserved until July, 2010).
1993: Law of Pensions No. 100 of December 23, implemented in 1994, modified by the law 797 of 2005. The law created the General Pension System (GPS) which introduced the mandatory private pension scheme; regulates the establishment and operation of Pension Fund Administrators (AFPs), asset management and the protection of members and beneficiaries' rights.
Note: The creation of the GPS minimum pension guarantee fund was declared invalid because of flaws in procedure relating to article 14 of Law 797 of 2003, which modified article 65 of Law 100 of 1993. However, article 7 of Law 797 of 2003, which assigns economic resources to the GPS minimum pension guarantee fund, continues in force with regard to the economic application of the guaranteed minimum pension as set out in article 65 of Law 100 of 1993. Nevertheless, the government has still to issue a modified or new statutory decree to clarify which entity is responsible for managing those economic resources.
The public scheme is managed by a public institution, Colpensiones; and the mandatory private pension scheme is managed by Pension Fund Administrators (AFPs). These two systems cover most of the country's employees, including public-sector employees, household workers, and self-employed persons.
Voluntary coverage is also possible.
Private pension personal (mandatory)
Two public funds (the Solidarity Pension Fund (SPF) and the Minimum Pension Guarantee Fund (MPGF)) provide a solidarity component for the private pension scheme.
The mandatory private pension scheme is a defined contribution type of scheme and assets are accumulated in individual accounts. The mandatory private pension scheme is managed by Pension Fund Administrators (AFPs).
Persons who decide to become members of the private scheme must choose to become a member of any AFP by filing a membership application without reference to their employers. Members can also transfer the accumulated capital in their individual accounts to another AFP every six months.
AFP's must be established as public or private companies and may also be established by third sector organizations (cooperatives, trade unions and cooperative banks).
Each AFP may administer several individual capitalization funds: mandatory pension funds, voluntary pension funds, alternative schemes, and a severance payment fund. Mandatory pension funds are defined contribution schemes and the assets, which are accumulated in individual accounts, are the exclusive collective property of the affiliate members. Severance pay funds are mandatory for all workers with an employment contract and are financed by employer's contributions of 8.3 percent of the insured's annual salary.
Since March, 2011 the multi-fund scheme began operations. This scheme was created with the law 1328 of 2009. The main goal of this scheme is to provide members with three types of funds according to their risk profile and manage the resources, in a separate fund, of those who are receiving their pension benefits.
These types of funds (according to the risk profile) are:
1. Conservative fund: For members with low risk profile. Its priority is to preserve the capital of the individual account and its target are members who are close to receiving their pension benefits and prefer to obtain less returns than to be worried about possible investment losses.
2. Moderate fund: For members with moderate risk profile. These members should be willing to accept possible investment losses due to risk exposure of this fund, looking for greater returns in the long term, in comparison with the conservative fund.
3. High risk fund: For members with high risk profile. These members are far from receiving their pension benefits and are willing to accept higher volatilities that can result in important investment losses as a consequence of the risk exposure of this fund, looking for greater returns in the long term, in comparison with the moderate fund.
4. Programmed withdrawal special fund: This unique fund was created for those members of the individual scheme who chose to receive their pension benefits under the Programmed withdrawal option.
AFPs are responsible for the management of the contribution collection, asset management and benefit administration. However, they may outsource contribution collection to other organizations if they wish. At the moment, banks and other financial institutions act as agents to collect contributions and pay out benefits on behalf of the AFPs.
Solidarity Pension Fund: The Solidarity Pension Fund (SPF) is administered in a separate account by the Ministry of Labour. The SPF has a solidarity account and a subsistence account. The fund is used to increase coverage to those members of the population, such as low-income workers, indigents or those in extreme poverty, who could not otherwise participate in the social security system.
Minimum Pension Guarantee Fund: The Minimum Pension Guarantee Fund (MPGF) guarantees minimum benefits. National government determines the organization and administration of the scheme, as well as which entity or entities will administer it. At the moment, it is administered by each AFP in a special account, due that the government has not defined which entity must do it.
Employees and the self-employed may also participate in voluntary complementary pension plans outside the GPS.
Public mandatory pension system
Solidarity Pension Fund: Employees with a monthly contributory base salary higher than four times the minimum monthly national salary must make additional contributions to the Solidarity Pension Fund (on a scale from 1 per cent on four times the minimum monthly national salary to 2 percent on 20 or more times the minimum monthly national salary).
The Financial Superintendence provides general supervision of both public and private individual account systems. Colpensiones administrates the pay as you go system.
GPS individual saving scheme: The mandatory private pension scheme is managed by Pension Fund Administrators (AFPs) and by Severance Payment Fund Administrators (AFCs) if they fulfil the same conditions as AFPs.
The establishment and operation of an AFP is subject to the authorization of the Financial Superintendency (SF), which also supervises and regulates the private scheme.
AFPs must be limited liability companies (i.e. privately-owned companies with at least five shareholders) or mutual institutions and at their establishment must have a minimum capital of COP 15,237 million for AFPs and COP 7,631 million for AFCs. The maximum capital must be less than ten times the minimum in order to avoid economic concentration. During the first five years of operations at least 20 per cent of the AFP's capital equity must be on public offer to third sector organizations (cooperatives, trade unions and cooperative banks).
AFPs can be authorized to establish and manage several pension funds simultaneously. However, the value of the funds administered by AFPs must not exceed 48 times the AFP's technical capital (the calculation of which is specified in law).
The members and shareholders of the AFP must elect an auditor to manage the internal audit of the fund's administration.
Two affiliate member representatives (elected from amongst the affiliate members) may participate in, and speak at, the AFP's governing board but may not vote. If the AFP manages both a pension fund and a severance fund there must be one affiliate member representative from each type of fund.
AFPs are responsible for the management of the contribution collection, asset management and benefit administration. However, they may outsource these tasks to other organizations if they wish. At the moment, banks and other financial institutions act as agents to collect contributions and pay out benefits on behalf of the AFPs.
Each AFP must sign a collective life contract with an insurance company under the SF regulations to finance disability and survivors' benefits.
GPS Solidarity Pension Fund: The Solidarity Pension Fund (SPF) is administered in a separate account by the Ministry of Social Protection. The SPF has a solidarity account and a subsistence account. The fund is used to increase coverage to those members of the population, such as low-income workers, indigents or those in extreme poverty, who could not otherwise participate in the social security system.
GPS Minimum Pension Guarantee Fund: The Minimum Pension Guarantee Fund (MPGF) guarantees minimum benefits. National government determines the organization and administration of the scheme, as well as which entity or entities will administer it.
Enforcement of affiliation
Sources of funds
Other sources of funds
Methods of Financing
Preservation, portability, transferability
Benefit qualifying conditions
Withdrawal of funds before retirement
Benefit structure / formula
Benefit qualifying conditions
Benefit qualifying conditions
Protection of Assets
Financial and Technical Requirements / Reporting
Standards for service providers
Winding up / Merger and acquisition
Bankruptcy: Insolvency Insurance / Compensation Fund
Disclosure of information / Individual action
Taxation of member contributions
Taxation of employer contributions
Taxation of investment income
Taxation of benefits
The SF has the powers and functions to:
• supervise Pension Fund Administrators (AFPs) and insurance companies and ensure they have the level of capital and assets levels required by regulations
• supervise the level of AFPs' return stability reserve
• supervise the winding up of AFPs
• regulate AFPs' procedures for member affiliation and transfer
• calculate the funds' minimum rate of return
• ensure that AFPs adopt administration, control and risks management mechanisms
• approve internal regulations and publicity of AFPs
• impose sanctions on AFPs in cases of violation of legal requirements
• supervise that the AFPs follow the rules regarding the investment regime established by the national government.
Calle 7 Nro. 4-49
Tel.: (+571) 5 94 02 00/01
Fax.: (+571) 3 50 79 99 - 3 50 57 07
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