Background on Key Figures and Institutions
The Mexican pension system comprises two main entities: the Afores (Private Retirement Funds) and the Infonavit (National Housing Fund for Workers).
Carlos Ramírez, a consultant and former president of the Comisión Nacional del Sistema de Ahorro para el Retiro (Consar), and Guillermo Zamarripa, president of the Asociación Mexicana de Afores (Mexican Association of Pension Funds), are key figures in understanding the differences between these two systems.
Growth Comparison Between Afores and Infonavit
According to data from the Consar, retirement savings managed by Afores grew by 22% last year, while home savings administered by Infonavit increased by only 8%.
- Afore retirement savings growth: 22%
- Infonavit home savings growth: 8%
Contribution Levels and Their Impact
Ramírez attributes the disparity in growth to differences in contribution levels for retirement and home savings accounts.
- Afore contribution level: 9.5% of the worker’s salary
- Infonavit home contribution level: 5% of the worker’s salary
Ramírez also highlights that the low returns from Infonavit’s home savings account compared to Afores’ high returns in retirement savings plays a significant role.
Investment Strategies and Asset Types
Zamarripa explains the difference in returns between Afores and Infonavit by discussing their investment strategies and asset types.
- Afore investment strategy: Diversified portfolios including stocks, bonds, currencies, commodities, structured products, and Fibras (real estate investment trusts).
- Infonavit investment strategy: Primarily invests in housing due to its constitutional mandate.
Zamarripa further explains that, given Infonavit’s investment restrictions, a good return for their portfolio would be the annual inflation rate plus 1-2 percentage points.
Underutilization of Infonavit Credit
Ramírez points out that a significant issue contributing to the return disparity is that most workers never use their Infonavit home credit.
As a result, theoretical home savings are converted into retirement savings with significantly lower returns compared to Afores.
Key Questions and Answers
- Q: Why are retirement savings in Afores growing faster than home savings in Infonavit?
A: The primary reasons are the higher contribution levels for Afores (9.5% vs. 5%) and the superior investment performance of Afores compared to Infonavit.
- Q: How do Afores and Infonavit differ in their investment strategies?
A: Afores have diversified portfolios including stocks, bonds, currencies, commodities, structured products, and real estate investment trusts. Infonavit, on the other hand, is restricted to investing mainly in housing due to its constitutional mandate.
- Q: Why are Infonavit home savings returns lower than Afore retirement savings?
A: The low utilization of Infonavit home credit by workers and the restricted investment options leading to lower returns compared to Afores.
