Retirement savings system and its reform.
Last July, President Andrés Manuel López Obrador, in one of his morning conferences, announced a proposal to reform the retirement savings system (pensions) aimed at workers who began to contribute under the 1997 regime (where they retire through the AFORE scheme), this initiative proposes to reform the following important points:
- • Reduce from 1,250 contribution weeks (representing about 25 years), to 750 contribution weeks (equivalent to 15 years) and gradually increase them, this being a minimum requirement for access to a guaranteed pension.
- Increase the replacement rate of workers by an average of 40%. With this, workers with an income of 1 Unit of Measure and Update (UMA) will reach a rate of 103% and workers with income of 5 UMA will increase their rate to 54%. This rate is the percentage of the current salary that will be available at the time of retirement.
- Increase the contribution to the total retirement from 6.5% to 15%, where the contributions of the worker and the government are not modified, concentrating the increase in employer contributions from 5.15% to 13.87%, which almost triples employers’ contributions to the retirement of their workers.
However, the proposal to reform the retirement savings system does not envisage changing the minimum age for receiving a pension and will remain at 60 years.
The government of President López Obrador foresees that with this proposal 34% of workers who reach a guaranteed pension will rise to around 82%. It should be noted that this proposal to reform the retirement savings system is in the process of being presented and, if it is voted on and approved, however it is important to keep you informed and know the implications that this has.
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