The report mainly attributes to two key factors: a revision in the index methodology that now values more the mandatory defined contribution (DC) system and an increase in the basic pension reported by the OECD.
The index, which measures the sustainability, adequacy and integrity of pension systems around the world, highlighted Mexico as one of the countries with the greatest relative improvement.
Mexico’s progress even surpasses other economies such as Chile and Argentina, which also saw significant increases in their scores.
Why did Mexico improve?
Among the main reasons for Mexico’s positive performance, the report highlights an increase in the basic pension, which improves economic security for the most vulnerable retirees.
In addition, the index rewarded the revision of the methodology that now gives greater weight to mandatory systems instead of voluntary ones.
Likewise, it highlights efforts to strengthen the integrity and sustainability components of the system.
Thus, Mexico has a B classification in the pension index. And some points need to be improved to reach the B+ rating, which some countries like Norway have. Internationally, the Netherlands continues to lead with the best score and a type A classification.
The recent reforms
It is important to remember that, in December 2020, a reform to the retirement savings system was approved that includes the following changes:
- Commission reduction: Afores must offer lower commissions, aligned with international standards, which increases net returns for workers.
- Increase in mandatory contributions: Total contributions will gradually go from 6.5% to 15% of salary by 2030, increasing the resources available at the time of retirement.
- Decrease in weeks quoted: The weeks necessary to access a guaranteed pension were reduced from 1,250 to 750 weeks, benefiting more workers.
Other reforms included improvements in the amounts of the universal pension and the guaranteed pension, expansion of rights for independent workers.
They recommend increasing universal pension
Despite the progress, the report points out areas for improvement to consolidate the pension system in Mexico:
- Continue increasing the universal pension for people in poverty.
- Increase mandatory contributions to ensure greater asset accumulation.
- Provide retirement income projections in members’ annual statements.
- Improve protection of accumulated benefits.
