Mexico’s pension reforms have helped it improve financial stability but contributions must go up, says the Organization for Economic Co-operation and Development (OECD).
In the face of an aging population, contributions must increase to ensure the long-term health of the system, suggests Mexico’s Pension System, a study released by the organization on Thursday.
The reforms have brought in a system of individual defined contribution accounts for both federal employees and private-sector workers, and the intention is to gradually harmonize the rules covering all pension plans to establish a national system for all Mexicans.
OECD general secretary José Angel Gurría said Mexico’s pensions regulator, Consar, has helped improve the efficiency of the system, allowing it to become a tool to promote inclusion and well-being, for which pension systems are essential.
“The population of Mexico and Latin America is still rather young, there are eight workers per retiree. In the next decades, though, population will age: by 2030, there will be five workers per retiree,” he said.
In order to guarantee a pension equal to 50% of the worker’s final salary, compulsory contributions should be between 13% and 18%. But the current rate is 6%, the lowest among OECD nations.
Other points to be addressed and improved, continued the report, are the transition from the old pension system to the new one, social protection programs for the elderly and the current fragmentation of the pensions system.
Finance Secretary Luis Videgaray, who was in attendance for the presentation of the report, declared that the government must strive to “generate more savings with better yields.”
The rate of government workers’ pensions, said Videgaray, increases by double-digit percentages every year, as stipulated by the federal budget.
Finance Secretariat and OECD officials agreed that the informal work force must be reduced to give more workers access to pension coverage.
Source: CNN Expansión (sp)