Pensions in Colombia – Guide to How the Colombian Pension System Works

Stacks of money with plants growing out of them growing from left to right, a representation of how cesantías in Colombia function.

If you are live and work in Colombia, you are entitled to a pension.  You and your employer are required to contribute to the pension fund in Colombia.  Read on for a guide to pension funds in Colombia, including what you and your employer must contribute, how your pension earns money, and how you can get your pension money in Colombia.

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Stacks of money with plants growing out of them growing from left to right, a representation of how cesantías in Colombia function.
Your pension in Colombia grows over time.  Image Source:  Pixabay

Pension Funds in Colombia

If you are employed in Colombia, by law you and your employer must make contributions to a retirement or pension fund.

In this article, we will give you a full run down of how the pension system in Colombia works and what you and your employer are required to contribute to your retirement account in Colombia.

What do you have to contribute to your pension fund in Colombia?

If you are employed, you must contribute 4% of your ingreso base de cotización to you pension fund.  Your ingreso base de cotización is either your salary or your salary plus 40% of your income that is not considered salary.

So for example, I receive a housing allowance where I work that is not considered salary for purposes of prima or cesantías, so I have to contribute 4% of my salary plus 40% of that allowance.

Your employer must contribute another 12% of your ingreso base de cotización to you pension fund.  That means a total of 16% of your salary is deposited into your pension in Colombia.

Let’s imagine you earn 2,000,000 pesos plus 2,000,000 in housing allowance, the table below will show what you and your employer contribute to your pension fund in Colombia.

IncomeDeductions
Salary: 2,000,000Fondo de Pension: 112,000 4% of 2,800,000 (2,000,000 + 40% of 2,000, 000)
Housing Allowance: 2,000,000
Total Income: 4,000,000

What is fondo solidaridad?

If your ingreso de base de cotizacíon is more than 4 times the legal monthly minimum salary (in 2018, 3,124,968 pesos), you also contribute 1% more in tax to the Fondo de Solidaridad, the subsidized public pension fund.

Note if you are self-employed or an independent contractor, then you must pay the full 16% of 40% of your income for your pension in Colombia.

How Does the Pension System in Colombia Work?

There is both a public and a private pension fund system in Colombia.  I’m going to briefly explain the public system first, and then I will explain the private public pension system in Colombia that most expats will probably use.

How does the public pension system in Colombia work?

The public pension system in Colombia is called Colpensiones, this is called the Régimen de Prima Media.  This public pension system in Colombia is subsidized.

Under this public pension system, if you meet a certain number of required weeks of contributions, you are paid out a pension based on your ingreso base de cotización for the last 10 years you were contributing.

To be honest, I’m not sure if non-Colombian citizens can be a part of the public pension system in Colombia (I am in the private).  It tends to get better interest rates, however you must meet the minimum number of weeks to be eligible to retire.  If you do not meet the minimum number of weeks, you will only be given back the money you have paid in without any interest.

On the flip side, if you do meet the weeks, your pension is subsidized if need be based on your income for the last 10 years of your work life.  There’s much debate amongst Colombians themselves whether it’s better to be in the public or private system precisely for this reason.

How does the private pension system in Colombia work?

If you are an expat, then you are probably in the private pension system, known as the Administradoras Privadas de Fondos de Pensión.

In this case, the same amount is deducted for your paycheck and your employer must contribute the same amount to your pension.

You also have the choice of putting it into one of three funds, called multifondos:

  • You can put it into the conservative fund (fondo conservador).
  • You can put it into the moderate fund (fondo moderado).
  • You can put it into the high risk fund (fondo de mayor riesgo).

You must put all your money into only one of these multifondos.  You should be able to choose which fund you are in from your pension companies website.  Ask your employer with which company they opened your account.

Once you reach a certain age, it does automatically put a percentage in the conservative fund.

If you don’t choose a fund to be in, you are automatically enrolled in the moderate fundIf you’d like to change it, note you can only do so every 6 months.

You can consult the interest rates for the last 5 years for each of the pension funds here.

It’s worth noting that there are minimum interest rates legally declared by the government for every 5 years (that’s to say you can lose money for a short time but not overall for 5 years, at least in theory)

You should receive a quarterly report by email or paper mail on how your pension has done every 3 months.  Since they only truthfully update the rates for every 5 years, it’s not the most transparent, but it’s fun to see how much interest you’ve earned.  Plus, at least on mine, they give you a cool pie chart that shows the percentage split between the contributions and the interest, and it feels good when you start to see the interest slice grow.

A stack of coins with a clock in the background representing how you earn cesantías over time in Colombia.
Your pension in Colombia grows over time.  Image Source:  Pixabay

How Do I Get the Money From My Pension in Colombia?

You can only get the money from your pension fund in Colombia once you have reached the minimum number of weeks paid (1,300 weeks or approximately 26 years) or the minimum age for retirement (57 for women and 62 years for men).  Technically in the private system, you can retire at any age and your pension will be based on the money you have paid in.  However if you meet the 1,300 weeks they will guarantee at least a minimum wage pension.  In the public system, your pension is based on what you have paid in the last 10 years if you meet the required number of weeks and the required age.

There you have it, a guide to the pension system in Colombia.  I hope you have found this guide informative and helpful.


Interested in learning more about pensions in Colombia?

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