Background on Afores and Their Significance
For a substantial number of formal workers, the individual Afore account represents their primary asset. Consequently, many turn to these accounts during times of crisis.
Who are Afores?
Afore, or Administraciones de Fondos para el Retiro, are Mexican pension funds that workers and employers contribute to throughout their careers. These mandatory savings accounts are managed by private financial institutions and aim to provide retirees with a stable income during their post-working years.
Why are Afores relevant?
Afores are crucial for Mexico’s workforce as they constitute the primary source of retirement income for most formal workers. With millions of contributors, Afores hold trillions of pesos in assets, making them a vital component of Mexico’s social security system.
Unemployment Withdrawals Reach Record Levels
During the first five months of 2025, unemployment withdrawals from Afores have hit an all-time high amidst Mexico’s economic slowdown.
- From January to May 2025, there were 740,157 partial unemployment withdrawals totaling 14.556 billion pesos, according to data from the National Commission of the System of Savings for Retirement (Consar).
- The amount withdrawn in January-May 2025 represents a 17% increase compared to the same period in the previous year.
- In 2024, Mexico witnessed the highest annual amount of unemployment withdrawals in history.
Mexico’s economy grew by 0.2% on a quarterly basis in January-March 2025, narrowly avoiding a technical recession (two consecutive quarters of contraction). However, the risk of recession remains, and the outlook for the rest of 2025 is challenging.
Amafore’s Perspective
The Mexican Association of Afores (Amafore) explained that for a significant portion of formal workers, their individual Afore account represents their primary asset. Thus, seeking out accumulated resources during times of crisis can be understandable and necessary.
Fraudulent Practices in Unemployment Withdrawals
The Mexican Chamber of Deputies recently approved a reform targeting fraudulent practices detected by Consar in unemployment withdrawals over the past few months. These practices artificially inflated withdrawal figures to historic levels.
- The fraudulent scheme involved simulating the hiring of a high-salary employee, registering them with the Social Security for one day, and then falsifying their termination to facilitate a larger unemployment withdrawal.
- Private offices executed this deception by misleadingly advertising the ability to withdraw thousands of pesos from workers’ savings accounts in exchange for substantial commissions on the withdrawn amounts.
Upon discovering this scheme, Consar introduced a validation mechanism for unemployment withdrawals in late July 2024 to combat these practices.
Although the validation mechanism temporarily reduced withdrawals, they surged again to historic levels by October.
Importance of Reintegrating Withdrawn Funds
Regulators and Afores consistently emphasize the importance of workers understanding that unemployment withdrawals not only decrease their account balance but also reduce the number of cotization weeks required to secure a pension.
Therefore, it is crucial for workers to appreciate the significance of reintegrating withdrawn funds to restore both their account balance and cotization weeks.
Key Questions and Answers
- What are Afores? Afore, or Administraciones de Fondos para el Retiro, are Mexican pension funds that workers and employers contribute to throughout their careers. These mandatory savings accounts are managed by private financial institutions and aim to provide retirees with a stable income during their post-working years.
- Why are unemployment withdrawals from Afores increasing? The rise in unemployment withdrawals is primarily due to Mexico’s economic slowdown, causing workers to seek their Afore savings during times of crisis.
- What were the fraudulent practices in unemployment withdrawals? Fraudulent practices involved simulating high-salary employee hirings, registering them for one day, and then falsely terminating them to secure larger unemployment withdrawals. Private offices misleadingly advertised these services for a commission on the withdrawn amounts.
- Why is reintegrating withdrawn funds important? Reintegrating withdrawn funds helps restore both the account balance and the number of cotization weeks required for a pension, ensuring a more secure retirement.
