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

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Listed:
  • Emma Aguila

    (RAND)

  • Michael D. Hurd

    (RAND and NBER)

  • Susann Rohwedder

    (RAND)

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.

Suggested Citation

  • Emma Aguila & Michael D. Hurd & Susann Rohwedder, 2008. "Pension Reform in Mexico: The Evolution of Pension Fund Management Fees and their Effect on Pension Balances," Working Papers wp196, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp196
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    References listed on IDEAS

    as
    1. Carlos Vidal & José E. Devesa- Carpio & Mónica Martínez, 2000. "Análisis Y Valoración De Los Sistemas De Pensiones Reformados En Latinoamérica," Working Papers. Serie EC 2000-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Alberto Arenas de Mesa & David Bravo & Jere R. Behrman & Olivia S. Mitchell & Petra E. Todd, 2006. "The Chilean Pension Reform Turns 25: Lessons From the Social Protection Survey," NBER Working Papers 12401, National Bureau of Economic Research, Inc.
    3. Olivia S. Mitchell, "undated". "Evaluating Administrative Costs in Mexico's AFORES Pension System," Pension Research Council Working Papers 99-1, Wharton School Pension Research Council, University of Pennsylvania.
    4. Solange Berstein & José Luis Ruiz V, 2005. "Sensibilidad de la Demanda con Consumidores Desinformados: El Caso de las AFP en Chile," Working Papers 4, Superintendencia de Pensiones, revised Apr 2005.
    5. Shah, Hemant, 1997. "Toward better regulation of private pension funds," Policy Research Working Paper Series 1791, The World Bank.
    6. Emma Aguila, 2011. "Personal Retirement Accounts and Saving," American Economic Journal: Economic Policy, American Economic Association, pages 1-24.
    7. Indermit S. Gill & Ceren Ozer & Radu Tatucu, 2008. "What Can Countries in Other Regions Learn from Social Security Reform in Latin America?," World Bank Research Observer, World Bank Group, vol. 23(1), pages 57-76, January.
    8. Moisés J. Schwartz & Enrique E. Domínguez & Roberto Calderón-Colín, 2008. "Consumer Confusion; The Choice of AFORE," IMF Working Papers 08/177, International Monetary Fund.
    9. Alberto Arenas de Mesa & Carmelo Mesa-Lago, 2006. "The Structural Pension Reform in Chile: Effects, Comparisons with Other Latin American Reforms, and Lessons," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 149-167, Spring.
    10. Rodrigo Gutierrez & Pablo Serra & Ronald Fischer, 2003. "The Effects of Privatization on Firms and on Social Welfare: The Chilean Case," Research Department Publications 3150, Inter-American Development Bank, Research Department.
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