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The new amends presented by the Mexican President, must be approved by the Chamber of Deputies and the Senate in order to enter into force, however, the authorities stated that the motives behind this reform are to eliminate the requirement previously established to contribute 1,250 weeks to access a pension since this prevented the Employees from actually having access to any pension and, on the other hand, the president pointed out that this amendment will correct two central problems, the one related to savings and pensions, which are not enough for a decent living, and decrease the years of contribution to have a fairer system.

The authorities mentioned that, Mexicans who started working after 1997 faced a difficult panorama regarding their pensions since the replacement rate (understood as the proportion of the last salary received as a pension) under the current regime, reaches 30%.

This initiative has not been published on the Congress’s official website, but from its presentation at the morning conference, it appears that the amendments are related to increase the mandatory contributions of retirement savings, which are made up of workers, companies and government contributions, from 6.5% to 15% in a period of eight years, with employers almost tripling their contribution, while those of the worker and the government will depend on the income of the contributor.

Likewise, in the case of Employers, the contribution provided for in the new amendments ranges from 5,151% for their employees with an income of 10 minimum wages to 13,875% for those who receive income of 25 UMA (Unit of Measure and Update). In the case of the federal government, the proposed social contribution in the reform will go from 8,724% for workers with a minimum wage income to 1,798% for those with incomes from four UMAs.

On the other hand, it is proposed to reduce from a thousand 250 to 750 weeks of the minimum contributions for the workers in order to receive a guaranteed pension, and the authorities assure that this measure will guarantee the human right to a dignified old age, because this scheme will increase pensions by 40%.

Likewise, the President pointed out that only 34% of workers manage to have a guaranteed pension, but less than 30% of what they received. So, with what is sought with these new amendments, the number of pensioners will rise to 82% and a pension system for older adults will be built.

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The above is provided as general information prepared by professionals with regard to the subject matter. This document only refers to the applicable law in Mexico. While every effort has been made to ensure accuracy, no responsibility can be accepted for errors or omissions. The information contained herein should not be relied on as legal, accounting or professional advice being rendered.