Background on Pension Systems in Mexico
In Mexico, pensions are categorized into two main types: contributory and non-contributory. Contributory pensions are funded by contributions from individuals during their working years, while non-contributory pensions are fully government-funded and include programs like the Universal Pension for Older Adults (PUAM).
Record-Breaking Pension Spending
According to data from Mexico’s Secretaría de Hacienda y Crédito Público (SHCP), the federal government spent a historic 1.59 trillion pesos on pensions from January to September 2025. This amount represents 34% of the total programmable expenditure during that period and has grown by 86% in real terms since 2018.
Contributory vs. Non-Contributory Pensions
Carlos Ramírez, a partner at consulting firm Integralia and pension expert, explains that the rise in pension spending is primarily due to the increase in non-contributory pensions, which have grown over 1,000% in the last seven years.
Contributory pensions are funded by individuals’ salary contributions to social security institutions during their working years, while non-contributory pensions are entirely government-funded. The PUAM is an example of a non-contributory pension, which was expanded to cover all adults aged 65 and older during former President Andrés Manuel López Obrador’s administration, along with an increase in the pension amount.
Spending Breakdown
- Non-contributory pension spending in the first nine months of 2025 was 433.003 billion pesos, compared to just 37.22 billion pesos in the same period of 2018.
- Contributory pension spending is mainly allocated to the redistribution systems, primarily the IMSS’s Pension Law 73.
Future Projections
The government anticipates that total pension spending will reach 2.2 trillion pesos for the entire year of 2025, with projections indicating that the pension liability will grow to 2.3 trillion pesos in 2026.
Ramírez previously stated that the government’s pension spending is expected to continue growing for at least the next two decades until reaching the peak of redistribution system pensioners.
Once this peak is reached, the number of redistribution system pensioners will start to decline, while the number of contributors (Afores) pensioners will increase.
Comparison to Other Government Spending
What else does pension spending equate to?
The government’s pension spending surpasses the revenue generated from Value-Added Tax (IVA) and Excise Taxes on Petroleum and Diesel (IEPS), which are the second and third largest sources of tax revenue for the government. In the January-September period, IVA and IEPS generated 1.469.913 billion pesos in tax revenue.
Moreover, pension spending exceeds the combined expenditure on education and health, which totaled 1.376.287 billion pesos in the same period.
Key Questions and Answers
- What are the two main types of pensions in Mexico? Contributory and non-contributory pensions.
- What caused the significant increase in pension spending? The growth in non-contributory pensions, especially the Universal Pension for Older Adults (PUAM), has driven this increase.
- How does Mexico’s pension spending compare to other government expenditures? Pension spending surpasses revenue from IVA and IEPS, as well as the combined spending on education and health.
