OECD sees pension collapse in Mexico within five yearsBy Elliot Bullman
In five years, the first generation to receive their pension from the Afore will be in trouble, experts say, mainly because it will be low, which will cause discontent.
Therefore, beyond analysing whether or not to increase the contribution, what is urgent is to reform the whole scheme, warned Pablo Antolin Nicolás, economist at the private pension unit of the agency.
From Paris, he said that the changes should raise contributions, raise wages, promote voluntary savings, improve old-age care programs and homogenize the pension system. Since otherwise "there will be a kind of complete disillusionment about the system that will lead to collapse," he said.
In addition, he considered that to raise the pensions of Mexican workers it is not enough to increase the obligatory contributions, a reform of the system that includes a whole package of shares is needed, although the results will be seen in the long term.
The current Mexican pension system came into force on July 1, 1997 and with a mandatory contribution of 6.5 percent will result in a pension or replacement rate of just 26 percent for the average worker.
He mentioned that it is not only a question of raising contributions for retirement, but of tackling the problem of poverty in retirement, where the pension system takes into account the entire population and is equal for all.
Saving money for retirement is still something that Mexicans are not good at doing and in young people this discipline is even less prominent.
93% of young people stated that they do not make voluntary contributions to their Afore, even though 58% of them said they are aware that for their old age they will need higher income than they currently have, says a study by Finx, a consultancy specialized in designing savings plans.
"The habit of saving, like any other, requires constancy and commitment. Today there are options in both traditional banking and Fintech that make it much easier to start. It is important that each person looks for and compare options that fit their possibilities, "said Cristina Cervantes, representative of Finx.
According to data from the Amafore, only 40% of men and 28% of women in Mexico save for retirement. It may sound simple, but talking to your grandparents or even your parents will help your vision about the future begin to change. Remember that the more years go by, the greater your responsibilities and saving will become much more difficult.
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