100% pension is impossible and does not occur anywhere in the world: BBVA economist

A complete guarantee that Mexican workers’ pensions will be equivalent to their last salary is impossible and could affect the country’s public finances, said Carlos Serrano, chief economist at BBVA Mexico.

“Implementing a 100 percent replacement rate for the entire (Mexican) population is not financially feasible and does not happen anywhere else in the world,” he said at a news conference.

The analysis follows a proposal by Mexican President Andrés Manuel López Obrador, who announced that on February 5 he will introduce a package of constitutional reforms that will include a proposal to have the state pay workers to receive a pension. comparable to your final salary upon retirement.

Even this morning, the President of Mexico noted that they are going to receive resources that will be a contribution from the Mexican government as they are going to “propose a big Republican austerity policy” and added that all the savings will be used for this purpose, a purpose that ” It won’t cost people that much.”

However, Serrano estimates that the low retirement rate of those retiring in Mexico has been addressed through legislative changes in 2020 that increased the employer contribution to each Mexican worker’s retirement savings system.

“There is a problem with the replacement rates of those who start retiring under the new scheme, they will be very low. To a large extent, this problem has already been solved as part of the 2020 reform, because contribution rates needed to be increased, and this has already happened,” he said.

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He explained that this is a decision and it is necessary that it continues to increase, but above all, he emphasized that “public finances must be controlled”; although he stressed that the biggest challenge would be reducing informality in the country.

“Some increase in the contribution rate is desirable as long as public finances are controlled, and we believe that the main challenge in pensions, as in other financial matters, is to reduce informality,” he commented.

In this sense, the chief economist of BBVA Mexico warned that just over half of the population employed in the informal economy will not have access to any funded pension scheme if this factor is not addressed. EFE

Source: Aristegui Noticias