
Contents
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Contribution Rates Under the Old and New Systems Contribution Rates Under the Old and New Systems
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Subaccounts Subaccounts
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Coverage Coverage
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Distribution of Unattached Accounts Distribution of Unattached Accounts
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Affiliate Contributions Affiliate Contributions
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Distribution of Funds Distribution of Funds
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Number of Companies Number of Companies
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Distribution of Contributors Distribution of Contributors
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AFORE Transfers AFORE Transfers
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Portfolios of AFOREs Portfolios of AFOREs
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Voluntary Contributions Voluntary Contributions
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Cost of the New System Cost of the New System
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Commissions Commissions
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Transition Costs Transition Costs
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Cost of the Guarantees Cost of the Guarantees
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Investment Regimes Investment Regimes
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Returns versus Fees Returns versus Fees
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Structured Notes Structured Notes
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Payout Phase Payout Phase
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Annuities Markets Annuities Markets
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The Gender Issue The Gender Issue
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Likelihood of Future Shortfalls Likelihood of Future Shortfalls
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Conclusions and Recommendations Conclusions and Recommendations
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Notes Notes
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References References
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10 Chapter 10 A Decade of Government‐Mandated Privately Run Pensions in Mexico: What Have We Learned?
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Published:November 2007
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Abstract
On July 1, 1997, a new privatized pension plan — called the Seguro de Retiro, Cesantía en Edad Avanzada y Vejez (RCV, or Retirement and Old Age Insurance) — took effect in Mexico. This chapter begins with a short description of the new system giving special attention to the cuota social or social quota, and the housing subaccount. It then discusses the coverage issue in the context of the government's claim that higher coverage would be an important advantage of the new system. It looks at the market structure of the pension funds in Mexico and investment portfolios, and tackles the cost structure of running the funds, transition costs, and the cost of the payout phase, noting the inequality between men and women in terms of the future pension payout. Finally, it reviews the conditions that may lead low-income affiliates to fall back on the minimum pension guaranteed by the reform. It shows that the system faces a number of challenges, including a reduction in the ratio of contributors relative to affiliates, high commission charges, and a likelihood that the government will have to support the old-age poor when lower-income individuals retire with insufficient funds in their accounts. On the other hand, the government bond market has deepened, bringing more financial security to the pension system.
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