Background on the ISSSTE and Its Relevance
The Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE) is Mexico’s social security system for government employees. It provides medical care, pensions, and other benefits to over 1.4 million workers and their families. The ISSSTE’s pension system underwent a significant transformation in 2007, transitioning from a solidarity-based system to an individual capitalization system through Afores (Ahorros para el Retiro).
Who is Claudia Sheinbaum?
Claudia Sheinbaum is the current Head of Government of Mexico City, equivalent to mayor, and a prominent figure in Mexican politics. As a member of the National Regeneration Movement (Morena) party, she succeeded former mayor Marcelo Ebrard in 2018. Her recent decision to adjust the minimum retirement age for ISSSTE workers has sparked discussions about its implications.
The Decreto’s Impact on Minimum Retirement Age
On Monday, Claudia Sheinbaum signed a decree to reduce the minimum retirement age for ISSSTE workers from the tenth transitional group starting in 2028. This change will allow some government workers to retire as early as age 53, while those with Afore accounts can retire at 65.
Costs and Financial Implications
Mario Delgado, Secretary of Public Education, stated that this decision will have a significant fiscal cost of over 36 billion pesos during Sheinbaum’s administration alone. Carlos Ramirez, former president of the National Commission for the Retirement Savings System, argues that the true cost will only become apparent from 2030 onwards, with annual expenses potentially reaching between 30 to 40 billion pesos in present-value terms.
The Tenth Transitional Group Explained
Following the 2007 ISSSTE reform, workers who were already employed before April 1, 2007, could choose to either join the new individual capitalization system through Afores or remain in the old solidarity-based scheme. Those who opted to stay were integrated into the “tenth transitional” modality, subject to a gradual increase in their minimum retirement age every two years.
Key Questions and Answers
- What is the decree about? The decree reduces the minimum retirement age for ISSSTE workers in the tenth transitional group, starting from 2028. This change allows some government workers to retire as early as age 53, while those with Afore accounts can retire at 65.
- What are the financial implications? The decree is expected to cost over 36 billion pesos during Sheinbaum’s administration. However, according to Ramirez, the true cost will only be evident from 2030 onwards, with potential annual expenses of 30 to 40 billion pesos.
- What is the tenth transitional group? This group comprises ISSSTE workers who were already employed before April 1, 2007. They had the option to either join the new individual capitalization system through Afores or remain in the old solidarity-based scheme. Those who stayed were integrated into the “tenth transitional” modality, subject to a gradual increase in their minimum retirement age every two years.
