Revamping Mexican Pensions
Afores need more options, says Oscar Medina Mora, CEO of Banamex Investment Management, Mexico's largest pension fund, with $12.5 billion under management.
What are the challenges facing Mexico's private pension
The defined contribution system in relation to the pay as you
go system is a great improvement because the social cost,
meaning the cost to the whole country, has diminished. That is
evidenced by the fact that the government is proposing to get
the public employees (ISSSTE) pensions system managed along the
lines of the Afores, for private sector workers. But there are
several challenges facing the Afore system if it is to fulfill
its objective of creating retirement savings equal to 70% of a
retired workers last wage.
Currently, workers contributions amount to about 6.5% of each
salary. In other countries that is substantially larger, 11% in
Chile and 19% in Germany. There is an additional 5% contributed
to the National Workers Housing Fund, which workers can choose
to allocate to their retirement fund, if they do not buy
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