Mexico plans reform to offer major boost to average worker pension

The overarching goal is to move pension benefits much closer to the salaries workers earn just before they retire, he said. Carlos Salazar, head of influential business lobby CCE, backed the plan during the news conference, touting the reform's "social dimension." Mexican pension funds, also known as Afores, managed some 4.3 trillion pesos ($192.60 billion) in savings at the end of June, according to government data.

Mexico's government plans a pension reform that should increase retirement benefits for the average worker by 40%, in part by raising employer contributions, Finance Minister Arturo Herrera said on Wednesday.

Flanked by President Andres Manuel Lopez Obrador and senior lawmakers, Herrera told reporters at a regular government news conference that worker contributions to the pension system would not change under the plan. Lopez Obrador, who has vowed to reduce chronic inequality in Mexico, said that if shortcomings in a previous pension reform were not corrected, retiring workers would eventually receive only half of their final salary.

"This would keep getting worse over time," he said. The reform must be approved by Congress and is seen affecting some 20 million Mexicans retirees. It will also enable savings to be invested in higher-yielding returns, said Herrera.

"The challenge here is to set up and design a more fair, more appropriate system," he said, especially for Mexico's many informal economy workers. Laborers who currently must work 25 years to qualify for guaranteed pension benefits. Under the proposal, that would fall to 15 years, then rise gradually.

Total contributions will rise from 6.5% to 15% of salary, over eight years, said Herrera. Employer contributions are due to rise from 5.15% to 13.87% under the plan. The overarching goal is to move pension benefits much closer to the salaries workers earn just before they retire, he said.

Carlos Salazar, head of influential business lobby CCE, backed the plan during the news conference, touting the reform's "social dimension." Mexican pension funds, also known as Afores, managed some 4.3 trillion pesos ($192.60 billion) in savings at the end of June, according to government data. ($1 = 22.3256 Mexican pesos)

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