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Pension Reform in Mexico: The Evolution of Pension Fund Management Fees and their Effect on Pension Balances
by Emma Aguila, Michael Hurd and Susann Rohwedder
WP 2008-196
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.
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