For several years in Mexico, experts in the system and the regulatory body itself began to warn that, if nothing was done about it, the first generations of retireed by the DC system would be characterized by having very few pensioners and that these few would have inadequate pensions. This was due to the high number of years of contribution required that almost no one would be able to achieve, and the low level of contribution that would barely be enough to finance replacement rates of 30%.

In 2020, the Government of Mexico, together with the pension administrator industry, employers’ guilds, and workers’ unions, promoted a reform to improve the pension system and guarantee better financial security for workers.

The main changes were the increase in contributions for workers, and reductions in the requirements to access the pension, specifically in terms of contribution time, addressing the problem of workers who at some point would have gone into informal employment, ceasing to contribute to the system for a few years.

These reforms to the contributory pension system are complemented by the promotion of the universal social pension of the Government of Mexico that, combined, would provide better coverage and sufficiency to pensions as a system.

After the reform, the government implemented a cap on the fees charged by pension administrators, which many saw as a fair measure to maximize the value of workers’ savings, nevertheless, other experts considered this could lead to concentration in the industry, since it would constrain the revenues of the administrators and put entry barriers to new participants.

Another aspect that the pension reform in Mexico did not contemplate was the increasing proportion of workers who enter the labor market in the informal sector, never touching the contributory pension system and, therefore, without generating vesting years or savings, which will continue to limit the coverage and adequacy of the contributory system and stress the social protection mechanisms.

Although Mexico’s 2020 pension reform is already beginning to show positive results regarding the most pressing issues it focused on, it remains to be seen if any of these measures will create new problems in the pension administration industry and among employers, as well as there are still pending issues to be resolved, the most important being the expansion of coverage to informal workers.