Colombia’s Petro Gets Victory as Senate Approves Pension Reform

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(Bloomberg) -- Colombian senators approved President Gustavo Petro’s pension reform in a victory for the unpopular leftist leader.

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Lawmakers in the upper chamber voted to make the government the manager of around 70% of all worker contributions, while private pension funds would receive the rest.

According to the bill, a portion of worker salaries, as much as 2.3 times the minimum wage, would go into the public system, while the balance goes into the private system. Private pension funds currently receive 75% of the volume of worker contributions, Corredores Davivienda estimated.

For Petro, the Senate approval represents a victory for his administration as his disapproval reached 60% in a recent poll.

The reform also includes a central bank-managed savings fund to pay for future pension compensation. The government estimates that the savings fund will accumulate as much as $320 billion by 2052, including financial returns.

The pension reform goes into effect on July 1, 2025 if approved by the lower house. The bill includes a management fee of up to 0.7% on assets held by private pension funds, which would replace an upfront levy workers pay when they contribute to social security. The Asofondos pension fund association estimates that the new fee will be charged on $49 billion in assets.

The bill must be approved in two more votes in the lower house, where the government holds a majority.

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