Background on Afores and the Issue at Hand
Administrators of Funds for Retirement (Afores) are pension funds in Mexico that workers contribute to throughout their employment. These Afores are managed by private financial institutions and aim to provide retirees with a monthly income based on their accumulated savings. Recently, concerns have arisen regarding excessive withdrawals for unemployment purposes.
Who is Arturo Olivares Cerda?
Arturo Olivares Cerda is a Mexican diputado (congress member) representing the Morena party. He proposed legislative changes to address the issue of excessive unemployment withdrawals from Afores.
Legislative Changes and Regulations
With the support of all political blocs, the Mexican Chamber of Deputies approved amendments to the Social Security Law. These changes aim to regulate partial unemployment withdrawals from Afores accounts, known as Afores.
- Eligibility: Individuals can now withdraw funds from their personal account if it has been open for at least three years and they have contributed for a minimum of twelve bimesters (six months). In such cases, they can withdraw an amount equivalent to 30 days of their base salary, with a limit of ten times the monthly value of the Unidad de Medida y Actualización (UMA).
- Long-term accounts: If the personal account has been open for five years or more, individuals can withdraw the lesser amount between 90 days of their base cotization salary or 11.5% of the subaccount balance, including retirement at advanced age and old age.
Addressing the Problem
The legislative proposal stems from detecting a significant number of workers fraudulently simulating unemployment withdrawals with the help of apparent promoters and facilitators. These individuals earn commissions ranging from 10% to 35% of the retirement savings, profiting at the expense of workers’ prevision funds.
In 2024, Afores reported over 3,000 million pesos withdrawn for unemployment in July, the highest monthly amount in the system’s history. In the first quarter of 2024, unemployment withdrawals exceeded 17,900 million pesos, a 27% increase compared to the same period in the previous year.
Key Questions and Answers
- What are Afores? Afores are privately managed pension funds in Mexico where workers contribute throughout their employment to accumulate savings for retirement.
- Why were regulations needed? There was a growing concern about excessive and fraudulent unemployment withdrawals from Afores, with facilitators charging high commissions and workers not meeting legal requirements.
- What do the new regulations entail? The approved changes set eligibility criteria for withdrawals, such as account age and contribution history, along with limits on the amount that can be withdrawn.
