Introduction
Mexico has a 42.2% penetration rate for Afore accounts, but only 7.9% of individuals contribute voluntarily to their retirement accounts, highlighting a significant gap between access and effective use of the pension system. A joint study by Vanguard and México, ¿cómo vamos? identifies barriers and proposes seven key actions to foster financial inclusion and voluntary savings in Mexico.
The Potential Market and Current Challenges
According to the study, Mexico’s formal savings market has a potential of 27.8 million people, an 18.0% increase from 2022. However, 54.5% of workers remain in informality, limiting access to social security and retirement savings.
The main challenge now is maintaining quality job creation with social security benefits in an economic stagnation context”, said Sofía Ramírez Aguilar, director of México, ¿cómo vamos?
The gender gap is also evident: while 51.4% of men have Afore accounts, only 34.2% of women do, a 17.2 percentage point difference. Labor participation also reflects disparities: 75.3% of men compared to 46.4% of women.
Why Isn’t More Saved?
They explained that reasons for not making voluntary contributions include insufficient income, lack of knowledge on how to contribute, distrust in the system, and unclear incentives. In 2024, only 10% of savers accumulated more than three months’ income; 57.0% saved the equivalent of a bi-weekly paycheck or less.
Low voluntary saving is not due to lack of will, but lack of tools”, affirmed Juan Hernández, Vanguard Latin America’s general director.
Vanguard, the world’s second-largest asset manager, has identified that Mexico has a critical window between 2025 and 2030 to transform financial behavior and reduce future vulnerability for millions of people.
A dignified retirement begins with cultivating the savings culture early and providing necessary tools to make it a reality”, said Juan Hernández.
Seven Recommendations to Boost Voluntary Savings
- Accessible Digital Tools: Promote user-friendly mobile apps and platforms for consulting, contributing, and monitoring savings.
- Automatic Inclusion: Link processes like obtaining the INE with automatic digital Afore account openings, adding incentives and financial education.
- Clear Fiscal Incentives: Communicate the tax benefits of formal saving in simple, comparative language versus informal schemes like tandas.
- Innovative Financial Education: Use games, simulators, and behavioral counseling to bring retirement planning to various age groups and segments.
- Formalization of Informal Savings: Integrate community schemes into the formal financial system through secure, low-cost digital platforms.
- Institutional Trust: Improve institutional communication, showcase results, and combat misinformation that keeps users away from the formal financial system.
- Simplified Processes: Design intuitive, inclusive processes that eliminate friction for starting and maintaining regular savings.
“The evidence indicates that voluntary saving in Mexico is not impossible, but a design and communication challenge. If digital tools, fiscal incentives, and automated processes are implemented, millions could start building a better financial future. The time to act is now”, Ramírez concluded.
Key Questions and Answers
- What is the current state of voluntary savings in Mexico? Only 7.9% of individuals with Afore accounts contribute voluntarily, indicating a significant gap between access and effective use.
- What is the potential market for formal savings in Mexico? The study estimates a potential of 27.8 million people for formal savings in Mexico.
- What challenges do informal workers face regarding retirement savings? Informal workers, who make up 54.5% of the workforce, have limited access to social security and retirement savings.
- What are the main reasons for low voluntary savings rates? Insufficient income, lack of knowledge, distrust in the system, and unclear incentives contribute to low voluntary savings rates.
- What are the seven key recommendations to strengthen voluntary savings in Mexico?
- Accessible digital tools for managing savings
- Automatic inclusion in Afore accounts through linked processes
- Clear communication of fiscal benefits of formal saving
- Innovative financial education methods for various age groups
- Formalization of community-based savings schemes
- Building institutional trust and combating misinformation
- Simplifying processes for starting and maintaining regular savings
