Colombian lawmakers have proposed a bill to Congress which would allow jobless people to withdraw up to 10% of their pension savings from private funds amid an economic crisis provoked by the coronavirus pandemic.
Colombia’s economy has been battered by the twin crisis of low oil prices and the coronavirus and unemployment has soared amid a months-long quarantine.
Private pension funds in the Andean country controlled some 273 trillion pesos, about $73 billion, at the close of June.
“The project seeks partial withdrawal in the face of the COVID-19 crisis, it will apply only and exclusively for some 8.6 million contributors who are inactive in private pension funds, who are generally people who are unemployed or work independently,” Harry Gonzalez, a Liberal congressman from southern Caqueta province, told us via telephone.
Gonzalez said a majority of lawmakers from his party support the bill, which will needed to be debated four times in the chamber.
Pension funds are the largest holders of public debt and some of the top investors in the stock market and private bonds.
The industry group which represents pension funds warned the proposal could have a negative impact on people’s savings.
“It means destroying long-term savings, investments that were made, so the person can consume in the short-term, and in macro-economic terms that has a monumental impact and is something which simply puts us in a worse situation than we were in initially,” said Jorge Llano, the technical vice-president of Asofondos industry group told Caracol TV.
The market reacted strongly in June when the government briefly entertained a proposal to order pension funds to transfer billions worth of contributions to the public retirement fund.
More than 1 million Chileans on Thursday asked to withdraw a portion of their pension funds, after that country passed a similar law allowing citizens to tap into retirement savings to buffer the economic impacts of the coronavirus.