There is a benefit for members in mandatory pensions that can be used and that was approved in the tax reform of 2016. We explain how it works and what to do.
The pension system in Colombia needs urgent reform. That is not secret and even though the presidential candidates say they will not touch the pension age, the truth is that in the country there are gaps that must be eliminated before the resources to finance the current pension system are finished. There are many reasons to believe that this topic will be touched soon.
First, because the retirement age must be increased. When the current system was created, it was done on a life expectancy of about 75 to 80 years for men and women. Today, the assumptions speak of 85 to 90 years of age, by far. Another reason is that the country has one of the earliest ages for the retirement of its workers, in Germany, Spain or Chile, to give a local example, that age was extended. Third, the reform is also in default because the resources for the system are running out.
Although there is an individual savings regime with solidarity (administered by the AFP and called RAIS) and a public one (the Medium Premium Regime, RPM, managed in Colpensiones), many workers subsidize the gap in the system by means of solidarity. public. And the worst is that other money that the government puts (which comes from the taxes that Colombians contribute), more than 90% goes in the payment of the retirees with the highest pensions. The system is inequitable and underfunded.
And since we touch on taxes and we are talking about pensions, we tell you that since last year, if you are a good saver and you know that your future depends on what you are contributing to your pension, you have an additional benefit if you made contributions Volunteers to a mandatory pension.
The 2016 tax reform allows members of the mandatory pension system to make additional contributions, or rather, volunteers. This figure of the voluntary contribution is contemplated in law 100 of 1993 in its article 63, which says: ” Voluntary contributions. The members of the Individual Savings with Solidarity Regime may quote, periodically or occasionally, values above the minimum limits established as a mandatory contribution, in order to increase the balances of their individual pension savings accounts, to opt for a higher pension or an early retirement. ”
According to Gerencie.com portal information, this figure is widely used by income taxpayers and they are subject to withholding tax on labor income because they are considered non-constituent income and subtracted from the base subject to withholding. at the source, considering that, the limits to which this tax benefit is subject.
So as not to be confused, we are not talking about voluntary pension funds, which also only exist in the individual savings regime, RAIS. But a similar figure is that, if you are an income tax return, you can make additional contributions to your mandatory pension. According to information from the Old Mutual pension fund, private funds offer this alternative in order for the member to invest today in order to maximize their pension income with large tax benefits.
“The Tax Reform – Law 1819 of December 2016, included new opportunities that benefit affiliates by making voluntary contributions to the Mandatory Pension Fund, which will allow for tax benefits as well as closing the pension gap by increasing the amount of the future pension or even, anticipate the date of retirement, “said the pension firm.
In accordance with this Law, the voluntary contributions made in the Mandatory Pension Fund are considered income not constituting income or occasional gain, it has no limits as to the value to be paid and must meet the condition defined in the article 55 of the Tax Statute.
When these contributions are considered as income not constituting income or occasional profit, they reduce the basis for calculating withholding tax and reduce the basis for calculating the income tax. Additionally, the voluntary contributions to the Mandatory Pension Fund have the same guarantees of minimum profitability according to the Multifund where they are invested.
Finally, clients can reduce their pension gap and maintain a quality of life in the retirement phase.
Why make the contribution?
According to Old Mutual, decree 2250 of 2017 ratified that voluntary contributions to mandatory pension funds will be considered income that does not constitute income or occasional gain.
As already mentioned, you can make your additional contribution without any restriction, there is no limit. In addition, it is a benefit that those belonging to the RAIS have since it does not apply to members of the Medium Premium Regime.
It is only valid for the work income card. The contributions will also be deductible for the employer in accordance with the provisions of the Tax Statute.
How to make the request?
At Old Mutual: the application is made to your advisor to increase the value of your pension by making voluntary contributions that will be invested in the mandatory pension fund chosen by you.
- In Colfondos
If they are going to be permanent (newspapers), you can tell your employer that you have made the decision to make voluntary contributions to your Obligatory Pension so that he can liquidate and send these contributions to Colfondos through the Integrated Contribution Payment Form (PILA) ).
If they are punctual contributions, (once), you can do so through the contribution format as an independent. Independents can also make voluntary contributions to a compulsory pension through PILA or through the contribution format as an independent.
The profitability of the contribution is the same as the minimum profitability insured to mandatory contributions, in the same fund where the pension savings are. Availability of resources: because you can count on your voluntary contributions, requesting them 180 days in advance.
These contributions must remain for 10 years in the fund or otherwise, the benefit is lost. Tax benefit, voluntary contributions to pension funds made by a worker or the employer in favor of the worker, have a special treatment from the tax point of view. Article 126-1 of the Tax Statute states that voluntary pension contributions made by a worker or his employer are considered as exempt income and, for that reason, they will not be subject to withholding tax.
The benefit has a limit and is that the sum of the values of the voluntary contribution, plus that of the Savings Accounts for the Promotion of Construction (AFC), which is dealt with in article 126-4 of this Statute, does not exceed 30 % of labor income or taxable income for the year, as the case may be, and up to a maximum of 3,800 Tax Value Units (UVT) per year.
- In Porvenir
The user must inform the employer in writing about the intention to make the Voluntary Contributions to Compulsory Pension through a payroll discount. As an employer, this contribution is included as a novelty before paying the payment form for PILA (Health and Pension), which does not need a prior registration with the pension administrator (Porvenir), this innovation applies to all Pension Funds. Remember that these contributions do not apply to Affiliates of the Medium Premium Regime administered by Colpensiones.
If you are affiliated with this fund, you only need to tell the employer that you will make a regular voluntary contribution through payroll deduction. If the contribution is punctual, you can do it for once as if you were an independent. The contribution can also be made directly by the self-assessment system of contributions PILA (Integrated Contribution Settlement Form).