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OECD Reviews of Pension Systems: Mexico

image of OECD Reviews of Pension Systems: Mexico

This review assesses the Mexican pension system according to the OECD best practices and guidelines, and draws on international experiences and examples to make recommendations on how to improve it. It provides an international perspective on Mexico’s retirement income provision and a short and focused review of the Mexican pension system. The review covers all components of the pension system: public and private pension provision for public and private-sector workers. It provides recommendations, using OECD’s best practices in pension design, on how to improve the Mexican pension system and thus ameliorate the retirement income that people may receive from the pension system.

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Improving the design of the pay-out phase in the Mexican pension system

This chapter discusses the current structure of the pay-out phase of the Mexican funded defined contribution pension system and proposes approaches to improve it. The chapter first introduces the main modalities that exist in Mexico to allocate assets accumulated in individual retirement accounts and thus finance retirement income. Individuals can generally choose between programmed withdrawals and life annuities. Only one type of life annuity is allowed. The chapter also discusses the problems with annuity markets and the management of longevity risk by insurance companies and occupational defined benefit pension plans. It concludes with recommendations regarding the management of longevity risk, the operation of the annuity market and the regulatory framework.

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