Savings for retirement in Mexico: impact of the contribution density on the balance of the individual account and old-age pension

Abstract

A little more than 20 years ago, the financing and calculation of the retirement pension for the old-age and old-age unemployment insurance of Mexico's largest social security system was structurally modified. In the current model, the amount of the pension depends on the balance of the individual account that each worker, in turn, is closely linked to the time of the working life in which the worker has contributed, that is, the density of quotation. This document presents calculations of the balance of individual pension accounts and pensions of different cohorts of workers in which the respective contribution densities influence. It is concluded these, in most of the scenarios, are not enough to obtain a pension so that the workers would have to postpone their retirement or receive in a single exhibition the balance of their individual account.