Under Mexico’s current pensions system , workers who are subscribed to the Retirement Funds Administrators (AFORE) are condemned to an average pension of 3,900 pesos upon retirement, which amounts to 39% of their last salary, according to the National Commission for Retirement Savings (CONSAR) .
According to calculations by the government body, in order for a worker to improve their perspective of retirement to more than 7 thousand pesos , they would have to save at least 2% of their salary, the age of retirement should increase from 65 to 68 years , and AFORE yields would have to improve.
The CONSAR pointed out that it is indeed possible to improve pensions and replacement rates in Mexico, which entail the percentage of the last salary that the worker in question would receive as pension, without having to alter their legal framework.
“Each worker, even under similar salary and age conditions, could obtain different provisional results depending on decisions made to determine their accumulated fund balance during the years following their retirement,” the institution stated.
A few days before the change of government, CONSAR stressed that efforts should be made to promote the benefits of voluntary individual savings plans among workers , and even find a way to automate and optimize said process.
As part of CONSAR’s efforts to promote AFORE’s benefits for workers, more information should be made available for workers to start engaging in voluntary individual savings to improve their yields. The institution added that workers should also consider the possibility of later retirement (beyond the age of 65).
Furthermore, CONSAR reminded that it was of utmost importance to increase compulsory contributions , which are currently quite low and represent only 6.5% of a worker’s salary .
In their analysis, the institution also stressed the importance of formalizing Mexico’s job market.
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