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FIAP > Boletín – Recientes > Pension Notes No. 54 – Reform of the Mexican pension system – June 2021
22 June, 2021

Pension Notes No. 54 – Reform of the Mexican pension system – June 2021

  • In January 2021 the reform of the Mexican pension system came into force, which undoubtedly constitutes a model to follow for the region. According to the Central Bank of Mexico, the main elements of this reform are: i) a gradual increase in the percentage of contributions, particularly those made by employers, to workers’ retirement accounts, from 6.5 % to 15% of salary; ii) a flexible scheme for obtaining the guaranteed minimum pension (PMG), which is generally higher than the PMG prior to this reform; iii) the reduction in the number of weeks that a worker must have contributed to be entitled to a pension; and, iv) the establishment of a maximum limit to the commissions charged by the retirement fund managers (AFORES).
  • The expected results of the reform are: i) a greater number of workers will be able to access a pension, by reducing the weeks of contributions required; ii) a higher pension due to the increase in contributions to workers’ individual accounts and the greater flexibility of the PMG; and, iii) a recovery of a higher balance in the case of workers who do not meet the requirements to obtain a pension, due to the increase in pension savings generated by the increase in the contribution rate.
  • The reform in force in 2021 would mainly benefit those formal workers who retire based on the contributions made to their individual account. In addition, the reform entails a significant growth in domestic savings that will allow greater availability of resources to finance long-term productive projects.
  • This reform would represent a slight fiscal cost on public finances, which in present value is approximately 0.3% of 2020 GDP for the entire period of analysis (between 2021 and 2100).

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