Understanding the Pension Landscape in Mexico
Mexico boasts more than 1,000 distinct pension systems funded by public resources. These systems collectively consume 23% of the federal government’s expenditure budget.
- Pension systems for private sector workers who contributed to the IMSS
- IMSS workers’ pension system (different from the previous one)
- Pension system for ISSSTE contributors
- Systems for state-owned enterprises like Pemex, CFE, and ISSFAM
- Pension for Bienestar program beneficiaries
- State, municipal, and judicial power pension systems
- Banco de México pension system
- Policemen’s pension systems
- Development bank and military forces pension systems
Three Major Groups of Pensioners in Mexico
According to actuary Francisco Miguel Aguirre Villarreal, there are three significant groups of pensioners in Mexico:
- First group: Comprises those not affiliated with contributory pension systems, representing around 55% of the Economically Active Population. These are approximately 35 million people with no access to contributory social security, only having access to the Bienestar Pension.
- Second group: Consists of IMSS-affiliated individuals, representing around 33% of the Economically Active Population. This group is further divided into those who began working before 1997 and those after, with the latter receiving pensions based on their individual account balances in Afores.
- Third group: Comprises public servants and university workers, representing around 12% of the Economically Active Population.
Historical Context and Current Situation
Before the 2020 reform, IMSS pensions did not exceed 25% of a worker’s salary, creating a significant social problem. In 2024, the Fondo de Pensiones para el Bienestar was established, allowing workers to retire at 65 with a pension equivalent to 100% of their salary, provided it does not exceed the average monthly salary of 16,777 pesos.
Challenges and Proposed Solutions
The enormous diversity of pension systems complicates implementing an efficient social security policy. Modifying each system also presents significant political complexities.
- Main causes of underfunding:
- Increasing life expectancy (currently 76 years)
- Decreasing birth rate
- Lack of regulations for reserve creation
- Recognition of seniority
- Low-interest rates
- Insufficient contributions
- Absence of a regulated salary
Aguirre Villarreal suggests the creation of an interdisciplinary group of experts to analyze economic, political, social, and legal aspects related to all pension systems in Mexico. This group should identify successes, correct deficiencies, and propose solutions for each system while addressing the financial and social issues they pose.
He advocates for a Security Social Secretariat to establish public policy in this area, with political and economic power to ensure necessary changes. Additionally, a national framework law is needed to regulate all pension systems while maintaining autonomy and setting minimum and maximum benefit limits.
Aguirre Villarreal emphasizes the urgency of addressing this critical financial issue, which constitutes 23% of the federal budget.
