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This morning, President Andrés Manuel López Obrador unveiled a bill to reform Mexico’s pension system in a bid to improve the pension workers will receive once they retire.
During his daily news conference, the Mexican president said he worked on this proposal for over a year and confirmed it has the support of workers and the business sectors.
The Mexican president proposed changes to the country’s individual-account pension program, suggesting that employer contributions should more than double and private pension administrators should lower their commissions.
President Andrés Manuel López Obrador said he wants to overhaul a system created in the 1990s under which workers usually wind up with too little money in their retirement accounts to give them a decent pension. Only about a third of workers retire with enough time employed to qualify for a pension, and average monthly pension payouts are only equivalent to about 30% of their last paycheck.
López Obrador proposed reducing the time worked to qualify from 25 years to 15, after which it would gradually move upward again. That would help about 82% of workers to qualify. His plan resisted calls to raise the minimum retirement age from 60 to 65.
The proposal aims to focus government contributions to the lowest-paid workers, in order to increase their pensions to about 54% of their last paycheck. After age 68, Mexicans also qualify for a smaller fixed, supplementary payment often used to buy groceries.
Under the proposed overhaul, over the course of eight years, employers’ contributions would rise from 5.15% to 13.87% of a workers’ salary or about 2.7 times more.
The banks and fund administrators that handle workers’ accounts would have to pledge to reduce commissions to around the annual international average for pension funds of about 0.7% per year.
President López Obrador said that if the current pension system is not overhauled, workers will receive only half of their salaries when they retire and that the situation will worsen in time.
The President praised Carlos Salazar Lomelín, the head of the Business Coordinating Council (CCE) because he worked on the project despite his differences with the government.
A major reform
Finance Minister Arturo Herrera said the pension reform is looking to lower the working time needed to be eligible by lowering it from 1,250 weeks to 750 weeks.
Herrera said workers will not increase the contributions to their pensions, instead, employers will increase their contributions from 5.5% to 13.87%.
The Finance Minister said the reform would result in a 40% increase in pensions.
Arturo Herrera said the pension overhaul will not only guarantee more resources for workers’ pensions but that it will also mean that people who worked 15 years will be eligible to receive a pension. Under current Mexican law, people must work for 25 at least in order to receive a pension.
This proposal will be presented before Mexico’s Congress for its approval.
President López Obrador’s pension reform
1. The pension reform will affect 20 million Mexican workers.
2. Workers who are employed for at least 15 years will have access to a pension.
3. Employers will increase their contributions from 5.5% to 13.87%, and the government will also contribute.
4. The government will contribute to the pensions of workers who make less than four minimum wages.
5. Authorities expect pensions will increase by 40%.
6. The reform will increase the percentage of workers who have access to pensions from 56% to 97%.
7. Afore commission will decrease
8. This overhaul will benefit workers under the Afore scheme
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