Gerardo Esquivel, the next Deputy Minister of Expenditures of the Ministry of Finance and Public Credit (SHCP) said during the celebration of the centenary of the Confederation of Industrial Chambers (CONCAMIN) held on Thursday that the first step for the next administration will be to evaluate an increase in the pension program for older adults, which will be doubled and will be granted after the age of 68.
The pension reform comes at a time of aging of the Mexican population, in addition to the fragmentation of the national system. According to the Social Security Law, Mexico has two types of schemes through which the insured can retire. As per the IMSS Law of 1973, candidates must meet requirements like a minimum of 60 years of age. In comparison, the IMSS law of 1997 requires a minimum of 1,250 weeks of contributions recognized by IMSS and the payment of the pension is made through an insurer or an Afore.
Increasing the retirement age allows for a considerable reduction in indebtedness and ensures greater long-term fiscal sustainability. In addition, it prolongs the country’s workforce and stabilizes domestic consumption. However, the increase in the retirement age can reduce workers’ pensions, and consequently the quality of life of the elderly, if it is not accompanied by an increase in the creation of jobs.
According to a study carried out by the OECD on the pension systems in Mexico, “the contribution system defined by individual accounts in 1997 has been successful because it has increased the capacity of the Mexican economy to finance pensions.” Thanks to this change, according to the OECD, at the end of 2014 the pension system represented 14.1 percent of the country’s GDP.
However, there are still a number of areas that require improvement to achieve a socially fair and sustainable pension system. The OECD recommends the Mexican authorities reinforce the transition process of the system from 1973 to 1997, increase the level of compulsory contributions, improve the social protection network to old age (social pensions) and reduce the fragmentation of the pension system.
Industry Analyst and Journalist at Mexico Business Publishing