Session: 58

Social Security

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Summary

The new millennium presents to all emerging and developed countries' societies the challenge of solving the growing problem of delivering pensions or the old age. Independently of recurrent recommendations to diminish the size of these obligations (having a higher retirement age; indexing pensions to inflation, not to salaries; etc...), as well as diverse proposals of investment regimes for pension funds, The World Bank, in its 1994 report (Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth) recommends a solution based on three pillars: A basic universal pension provided by the government; a mandatory saving system through companies or individuals; and voluntary savings. One of the best examples of these scheme has been implemented in the Netherlands, where the entire resident population is entitled to a basic state pension; more than 90% of workers is covered through an occupational pension scheme; end in average, employees contribute with about 1/3 of total contributions on (theoretically) voluntary basis. Making a comparison with a cappuccino, the government provides the coffee; the company the milk; and the employee the cream, the cinnamon, mocha and sugar to his like. This model is indeed known as the Dutch-Cappuccino Model. This work explores the viability, social, economic and demographic conditions as well as the legal frame in Mexico that would allow to fortify the current pension model adopted after the 1997 reforms, through the "tropicalization" of the Dutch-Cappuccino Model. Recommendations to reform certain laws and rules to facilitate the adoption of such a scheme are also included.

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