Pension Reform in Mexico: The Evolution of Pension Fund Management Fees and their Effect on Pension Balances

Authors

Abstract

In 1997 Mexico introduced Personal Retirement Accounts (PRAs) which, after a transition phase, will completely replace the pay-as-you-go (PAYG) system. We give a detailed overview of the relevant institutional framework, the market of PRA providers and how it has evolved since the 1997 reform. We use administrative data obtained from CONSAR, the regulatory agency of the PRA system to assess how pension fund management fees affect pension accumulations. We find that fees can drain up to a quarter of individuals’ pension savings.

Key Findings

  • In 1997 Mexico introduced Personal Retirement Accounts to replace the pay-as-you-go public retirement system.
  • We use administrative data to assess how pension fund management fees affect pension accumulations.
  • Fees can drain up to a quarter of individuals’ pension savings.

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Project

Paper ID

WP 2008-196

Publication Type

Working Paper

Publication Year

2008
pavement-enterprise