measurement of the social insurance schemes in mexico, basis on the 2008 sna martha tovar workshop...
TRANSCRIPT
Measurement of the Social insurance schemes in Mexico, basis on the 2008
SNAMartha Tovar
Workshop on Pensions 22-24 April 2013
Canberra, Australia
• Background• Social security system• Defined contribution schemes• Defined benefit schemes• Remaining tasks• Conclusions
Content
Background• In Mexico the Social insurance system covers Health and Pensions
and the benefits are provided by a wide net of institutions.• The kind of benefits provided differs depending on the rights
enclosed in the collective bargaining.• The National social insurance system comprises the named
“National Pension System”, a set of institutions, schemes and funds that operate simultaneously.
• The pension schemes involved are of the three known types: DC, DB or hybrid.
• There have been two important reforms in the social security Laws that cover the private and public employee schemes, on these bases the pension scheme with individual accounts (DB) and private administrations have risen.
• Nonetheless, the DC schemes exist for covering the ratio of the workers that chose the previous scheme or belong to a scheme that is of DC by definition.
Social security system
There have been two reforms in the social security scheme in Mexico, after that its functioning as following:
Social security reforms
Scheme for employees in the
private sector
1973 Law: Unfunded pension scheme sponsored by the
government (DC)
1997 Law: Funded pension scheme based on individual
accounts (DB)
Scheme for employees in the
public sector
1983 Law: Unfunded pension scheme sponsored by the
government (DC)
2007 Law: Funded pension scheme based on individual
accounts (DB)
Reforms to the Social
security Laws
National social insurance System and National Pension System
Three Federal government
institutions andLocal institutions
(mainly for Health)
Employees of federal
administrations, Local governments,
Universities, etc.Private employee
schemes.
DB scheme
DC scheme
DB scheme
DC scheme
Hybrid scheme
Scheme for private sector employees: all the workers have an individual account, but the final decision about the scheme will be made at the end of the labor life.Scheme for the public sector employees: the workers have already decided the scheme, DC or DB.
The constitution and way of operation are discretionary, depends on the arrangements between the employee and the employer.
National Pension System
Contributions entered to the schemes for Private and Public employees% respect the defined basic wage
Non pension contributions
Pension contributions
Social contributions to the Social security system
Net social contributions
The social contributions are compiled taking into account the origin: pension and non pension, some results are presented following:
Households accounts% of GDP Funded scheme Non funded scheme Total
Code Concept 2010 2011 2010 2011 2010 2011 Secondary distribution of income account Social contributions and benefits for pension
D6111 Employers’ actual pension contributions 0.76 0.75 0.44 0.45 1.19 1.20D6121 Employers’ imputed pension contributions 0.17 0.21 0.17 0.21D6131 Households’ actual pension contributions 0.02 0.02 0.02 0.02D6141 Households’ pension contribution supplements 0.93 0.26 0.93 0.26
Social insurance scheme service charges 0.15 0.15 0.15 0.15D6211 Social security pension benefits in cash -1.78 -1.84 -1.78 -1.84D6221 Other social insurance pension benefits -0.14 -0.13 -0.17 -0.21 -0.31 -0.33
Social contributions and benefits for non-pension D6112 Employer‘s’ actual non-pension contributions 0.98 0.72 1.01 0.99 1.99 1.71D6122 Employers’ imputed non-pension contributions 0.29 0.29 0.29 0.29D6132 Households’ actual non-pension contributions D6142 Households’ pension contributions supplements 0.41 0.32 0.41 0.32D6212 Social security non-pension benefits in cash -0.09 -0.09 -0.09 -0.09D6222 Other social insurance non-pension benefits -0.26 -0.27 -0.29 -0.29 -0.55 -0.56
Use of income account D8 Adjustment for the change in pension entitlements 1.41 0.76 1.41 0.76B8g Saving 7.40 6.69
Population covered by the Social security system
Population covered by the Social security system
The 68.5 millions of people covered by the Social security system are integrated as following:
Active Employees Retired personPopulation
coveredCovered population Employees Beneficiaries Retired person
Retired Employees'
beneficiaries
Private sector employee scheme
31.41 40.38 4.58 3.83 80.20
Public sector employee scheme
4.66 11.37 2.45 1.32 19.80
Total 36.07 51.75 7.03 5.15 100.00
Retired person Unfunded scheme
Funded scheme
Private sector employee scheme
65.14 0.00 65.14
Public sector employee scheme
34.76 0.10 34.86
Total 99.90 0.10 100.00
Defined contribution schemes
Defined contribution schemes
The Social contributions for pension are assigned to individual accounts, then are direction to investment funds specially for the retirement.The sum is named “Resources of the System of Saving for the Retirement”.
How does the DC schemes operate?
Insurance and pension
institutions
Social contribut
ions
Pension resources
administrations
Pension investment
funds
Others social insurance schemes
Social security institutions
Private and public sector Employers
Households
Regulatory and supervisory institutions
Remunerations
Non pension benefits
DC
Pension funds
Retirement payments
Regulatory frame
Defined benefit schemes
Defined Benefit Schemes
The DB schemes are financed with the public budget, special current transfers are assigned to cover this pension payments.
Regarding the government liabilities on pensions, some actuarial estimations of the future pension obligation report amounts around 104.2% of GDP, for the year 2010.In 2012, the Secretariat of Treasury and Public Debt prepared a set of recommendations to elaborate actuarial valuations of pensions and other labor obligations, for the entities that conform the central government and the entities under budgetary control, based on the generic methods ABO and PBO. However, they are voluntary recommendations.
Considerations for the measurement of the liabilities for labor obligations
The CD schemes represent a serious problem in the public budget and even in some private schemes, the reforms applied in the past into the Social insurance scheme has established new parameters to understand the issue and has promoted the measurement of the future liabilities, but the fact is that there is still a big task to do to dimension the real size of the pension entitlements.As in all the countries, in México the life expectancy is growing and another structural reform could be necessary to solve the problem, as a beginning.
Remaining tasks
Identified schemes, public and private sectorThe supervisory entities identify some schemes installed in the private sector and in some public entities, the type could be CD, BD or hybrid.
BD CD Hybrid Total
Covered employees
Number of schemes
Covered employees
Number of schemes
Covered employees
Number of schemes
Covered employees
Number of schemes
Schemes in the private sector
765 925 1 156 175 786 184 313 904 662 1 255 614 2 002
Schemes in the public finance sector
4 650 n.a 383 n.a - - 5 033 -
Schemes in autonomous organs
n.a 30 n.a 34 - - 137 039 64
The data is not fully reported, in the private sector the report is voluntary and in the public sector the entities do not submit the enough data for auditor purposes. In private sector schemes the amount of labor passives rises to $466,327 millions. It is important to stress that more than the half of the schemes is no funded totally.
Columns D to G
Recently a CG supervisory organ audited the pension funds operated by public administrations, through this auditory was possible to know more about the types of plans and the covered population.
Work in progress for the year 2008% GDP
In th
e fin
anci
al c
orpo
ratio
ns s
ecto
r
In th
e ge
nera
l gov
ernm
ent s
ecto
r
In th
e ge
nera
l gov
ernm
ent s
ecto
r
Column number A B C D E F G H I JOpening balance sheet
1 Pension entitlements 0.04 0.03 0.07 0.07Transactions
2 Social contributions relating to pension schemes 0.01 0.00 0.01 0.00 0.022.1 Employer actual social contributions 0.01 0.00 0.01 0.00 0.012.2 Employer imputed social contributions 0.00 0.002.3 Household actual social contributions 0.00 0.002.4 Household social contribution supplements 0.00 0.00 0.00
3Other (actuarial) accumulation of pension entitlements in social security funds 0.01 0.01
4 Pension benefits 0.00 0.00 0.00 0.01 0.025 Adjustment to the change in pension entitlements 0.01 0.00 0.01 0.00 0.00
6Change in pension entitlements due to transfers of entitlements
7Changes in entitlements due to negotiated changes in scheme structure 0.02 0.02
Other economic flows8 Revaluations 0.00 0.00 0.009 Other changes in volume 0.00 0.00 0.00
Closing balance sheet10 Pension entitlements 0.05 0.03 0.08
Related indicatorsOutput 0.02 0.02Assets held by pension schemes at end-year 0.03 0.03 0.03
Soc
ial s
ecur
ity p
ensi
on s
chem
es (
IMS
S &
IS
SS
TE
)
Tot
al p
ensi
on s
chem
es
Pen
sion
ent
itlem
ents
of r
esid
ent h
ouse
hold
s
Row
num
ber
Position / transaction / other f low
Non-general government General government
Liabilities appear in the core national accountsLiabilities do not
appear in the core national accounts
Def
ined
con
trib
utio
n sc
hem
es (
SS
R)
Def
ined
ben
efit
sche
mes
(P
MX
)
Tot
al
Def
ined
con
trib
utio
n sc
hem
es
General government employee defined benefit
schemes
Conclusions
• The reforms in Mexico have not been totally structural for the whole Social security system.
• Even when the System has changed, it does it mean that is fully funded and of DB for all the covered employees, therefore, there are a lot of actuarial valuations that need to be done to quantify the future obligations.
• The most of the private schemes are installed in the accounting of the sponsor’s scheme and more than the half is underfunded.
• The main problem that is facing to measure the DB schemes is the lack of data to apply the actuarial methods.
• The way to follow is the researching in the entities that sponsor the schemes and the consulting through the supervisory and auditor entities.
Thanks for your attention!
