IDEAS home Printed from
   My bibliography  Save this paper

Simulations of long-term returns and replacement rates in the Colombian pension system


  • Javier Alonso
  • Carlos Herrera
  • Claudia Llanes Valenzuela
  • David Tuesta


This study is a theoretical exercise for Colombia that aims to simulate a variety of scenarios under a hypothetical scheme similar to the multi-funds currently in operation in Chile, Mexico and Peru. This has been done by modeling the future movement of asset prices that are considered to be representative of equity and fixed-income using the Monte Carlo method. After making the simulations we have constructed alternative investment portfolios according to the chosen combination of equity and fixed-income, and compared and assessed them in terms of their risk-return ratio. The study emphasizes the fundamental importance of adequate contribution densities for obtaining sufficient income for old age, and the relevance of high returns, with adequate risk limitation. Another of the study’s aims is to use the new multi-fund scheme defined for Colombia as a basis for the hypotheses of different scenarios projected to 2050. These will include the composition of members’ pension fund portfolios and changes in the scheme over time, taking as a reference the life-cycle scheme operated in Mexico, as well as other compositions and profiles that participants may decide to enter into in accordance with their choice and the limits set by regulations. The results of the work confirm what has been found in other studies on the subject for the Colombian economy: that the implementation of a multi-fund system will provide pension-fund members with efficient returns in the long term, with limited volatility over time.

Suggested Citation

  • Javier Alonso & Carlos Herrera & Claudia Llanes Valenzuela & David Tuesta, 2010. "Simulations of long-term returns and replacement rates in the Colombian pension system," Working Papers 1029, BBVA Bank, Economic Research Department.
  • Handle: RePEc:bbv:wpaper:1029

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Alejandro Reveiz & Carlos León & Juan Mario Laserna & Ivonne Martínez, 2008. "Recomendaciones para la modificación del régimen de pensiones obligatorias de Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 26(56), pages 78-113, June.
    2. Diego Jara & Carolina Gómez & Andrés Pardo, 2005. "Análisis de eficiencia de los portafolios pensionales obligatorios en Colombia," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 23(49), pages 192-239, December.
    3. Alejandro Reveiz & Carlos León, 2008. "Administración de fondos de pensiones y multifondos en Colombia," BORRADORES DE ECONOMIA 004598, BANCO DE LA REPÚBLICA.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bbv:wpaper:1029. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (OSCAR DE LAS PENAS SANCHEZ-CARO). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.