Issue: February 2021

MEXICO - Reform to the Pension System in Mexico

By: Francisco Udave Treviño, Santamarina + Steta, Mexico City

On December 9, 2020, the Senate of the Republic approved the reform that was previously been approved by the House of Representatives, in terms of which several provisions of the Social Security Law and the Retirement Savings System Law were amended, added and repealed.

The purpose of the reform is to improve the quality of life of the workers who are eligible to a pension under the Social Security Law, with the following main topics:

  • Reduce the number of weeks of contributions from 1,250 to 1,000: this change will be made gradually, starting with a requirement of 750 weeks of contributions to enjoy the benefits of elderly and retirement insurances, increasing annually by 25 weeks to reach a total of 1,000 weeks by the year 2031.
  • Increase in the contributions to the workers' individual account: the workers' contributions will not increase; however, the employers' contribution will gradually increase from 5.15% to 13.87% in a period between 2023 and 2030. Likewise, the re-composition of the contribution made by the State will come into force in the year 2023 to benefit workers with lower income.
  • Increase the amount of the guaranteed pension granted to workers: the form for determining the amount of the pension is modified so henceforth it is calculated taking into account the weeks of contributions, the average of the contribution salary that the worker obtained during his/her working life and his/her age. This change will also be made gradually between 2023 and 2030.
  • Death of the worker or pensioner: it will not be necessary for the appointed beneficiaries to follow a jurisdictional instance to exercise their rights to receive the resources of the elderly and retirement account.
  • Workers will have the possibility of choosing, when they obtain a pension, to obtain a for-life insurance with a fixed amount and/or to maintain the resources at the Retirement Funds Administrator (AFORE for its acronym in Spanish), and make programmed withdrawals which are deducted from the balance.

The approved initiative was published in the Official Gazette of the Federation on December 16, 2020, in order to come into force on January 1, 2021.

Francisco Udave Treviño

Santamarina + Steta, Mexico City