In 2030, retirement fund administrators would manage up to 40% of Mexico’s GDP

According to a report, retirement fund administrators would manage between 35% and 40% of Mexico’s Gross Domestic Product (GDP) by 2030.

The funds managed by retirement fund administrators, known as Afores in Mexico, would represent between 35% and 40% of the GDP by 2030.

This information was provided by the Ministry of Finance and Public Credit (SHCP), and it would signify an increase of at least 16 percentage points over the remaining decade.

As of the end of the first half of the year, Afores were managing 5.55 trillion pesos, which is 19% of the GDP, according to information from the National Commission for the Retirement Savings System (Consar).

The SHCP explained in the 2024 General Economic Policy Criteria (CGPE) that the growth in workers’ resources would be a result of the Social Security Law reform promulgated in 2020.

The 2020 reform stipulated that from 2023 until 2030, employer contributions to the Retirement and Old Age Severance subaccount would gradually increase from 3.150% to 11.875%.

However, this would depend on each worker’s Salary Base for Contributions (SBC).

Meanwhile, employee contributions would remain at 1.125% of their salary.

In total, worker-employer contributions, combined with the social fee, would increase from 6.5% to 15% during the mentioned period.

Undoubtedly, the increase in retirement fund administrators‘ collection is closely related to these reforms.

In fact, in 2023, the increase in employer contributions ranges from 0.13 percentage points for those with an SBC of 1.01 to 1.5 Units of Measure and Update (UMA) to 1.0 percentage point for those who contribute more than 4.01 UMAS. In 2023, one UMA represents 103.74 pesos per day.

Retirement fund administrators: 2030

Regarding this, Guillermo Zamarripa, president of the Mexican Association of Afores (Amafore), commented that the increase in contributions would be seen in the short term in the assets managed but would benefit workers in 20 to 25 years.

There will be more resources in workers’ accounts, but the benefit will be that these additional resources will provide significant future savings for people who retire in 2040 or 2050,” he said.

In the CGPE 2024, it was reported that from September 2022 to June 2023, 17,186 new guaranteed pensions were issued through Afores, with an average monthly amount of 5,483 pesos.

The SHCP clarified that the amount of the guaranteed pension increased by 67% compared to the value in 2020 and 32% compared to 2021.

However, the pensions offered by Afores are still lower than those seen in other pension systems.

A person who contributed for 500 weeks to the IMSS under the 1973 regime can access an average minimum pension of 7,000 to 8,000 pesos.

With the 2020 LSS reform, the required contribution weeks were reduced from 1,250 to 750 to allow more workers access to a guaranteed minimum pension.

In 2021, the year of the first generation of pensioners through Afores, there were 29,720. Of these, 95% (28,272) benefited from the reduction in contribution weeks from 1,250 to 750. In terms of gender, 55% were men and 45% were women.

For the remainder of the decade, the required weeks to qualify for a pension will gradually increase by 25 weeks each year until reaching 1,000.

A worker who contributes to the IMSS under the Afores system needs to have worked for 800 weeks to access a pension in 2023.

They must be 60 years old to access a pension for advanced age or 65 years old for a pension due to old age.

Also read: Mexico’s Exports Increased in August: Fourth Consecutive Month.

El Economista MX