On 22 July 2020, the Mexican government announced that an agreement with the private sector had been reached to achieve the government's social security reform goals.
Broad objectives of the reform include improving AFORE participation rates, funding and level and types of benefits provided. Key areas of reform focus include:
Employer AFORE contributions - up
Employer contributions would increase over an eight-year period to reach 13.875% of pensionable salaries in order to improve AFORE funding levels.
Qualifying contribution periods - down, then up
The minimum qualifying contribution period required for the AFORE guaranteed minimum benefit would reduce to 750 weeks, and then gradually increase to 1,000 weeks over a 10 year period.
Payment options for retirement benefits - relaxed
Benefit payment options would permit the combination of scheduled withdrawals and annuity purchase.
Federal AFORE contributions - up
Federal government AFORE contributions would increase to an amount equal to four times the federal inflation indexing reference (known as the unit of measurement and update, or the UMA).
Average pension benefit - up
The average benefit would increase to over 100% of the minimum wage (and reduce the necessity of subsidisation to secure a minimum permissible benefit).
The proposal was officially presented to the Cámara de Diputados (Chamber of Deputies) on 25 September 2020 but was met with questions concerning changes perceived as being made after the private sector agreement. Nevertheless, on 29 September, proposal details were turned over to various commissions to seek opinions and compliance determinations for future debate in the chamber.
Mexico's private insurance companies and the government have developed a new agreement that will change how the country meets its social security objectives. Find out more about these changes and other developments around the world with Axco's insurance industry experts.
"The first worker in the Afores system that began in 97, they were going to start retiring 23 years later, in 2022. This reform will come in just in time to protect all workers" - secretario de Hacienda y Crédito Público, Arturo Herrera Gutiérrez