Retirement & pension funds

Pensions and their equitable distribution have been relevant for many years in countries around the world. In Mexico the pension system consists of four components: federal and state social pensions, the Retirement Savings System (Sistema de Ahorro para el Retiro, SAR); special pensions for some public employees and universities; and voluntary individual pension plans.

Recent Reform

Until the mid-1990s, the country had a traditional defined-benefits pension system, which was administered by the government. However, with the approval of the 1992 Social Security Act, which created the SAR, pension funds have been transformed. Then, in 1995-96 a new Social Security Law was approved, and the legal and organisational framework for the new system was established under the SAR Law, with the result being that the private sector pension system became a defined-contribution scheme, under which workers are the owners of their retirement accounts. These regulations went into force in 1997, so that people who entered the labour market in July of that year had a SAR account. In 2007 the pension system for public sector workers was also overhauled, which brought with it notable fiscal savings as a percentage of GDP.

In general terms, the reform of the pension system changed the defined-benefit scheme, in which active workers financed retirement pensions as part of an individual capitalisation system that sees each worker have his or her own account. Furthermore, pensions are no longer administered by the Mexican Social Security Institute, and have been passed into the hands of administradoras de fondos para el retiro (AFORES), or retirement funds administrators, which opened the way for private participation in the segment. The funds raised by AFORES are invested by sociedades de inversión de fondos para el retiro (SIEFORES), or investment companies specialised in retirement funds. SIEFORES include five financial entities that are operated by AFORES, and authorised by the National Commission for SAR (Comisión Nacional del SAR, CONSAR).

Current System

At present, workers can choose their preferred SIEFORES, and since implementation 20 years ago they can select their own AFORES. However, these firms were designed with different clients in mind, with SIEFORES, for instance, assigned based on a worker’s. SIEFORES differ in terms of the investment rules that apply to them, and therefore exposure to risk, with resources distributed between local debt, equity markets, real estate investment trusts (fideicomisos de inversión y bienes raíces, FIBRAs), goods and structured instruments. Each class is limited to different percentages, according to the risk limits for each company. In terms of portfolio diversification, changes have also been made to the investment regime that have led to a more efficient allocation of resources and greater access to different financial instruments.

In 2008, 68.3% of AFORES’s resources were invested in government securities, 15.4% in domestic private debt, 4.7% to international equity, 5.9% in national equity, 0.2% to structured debt and 5.5% in international debt. By the end of 2016, AFORES’s portfolios were distributed as follows: 52.8% in government securities, 19.9% in national private debt, 13.9% in international equities, 5.9% in national equities, 4.5% in structured funds, 1.7% in FIBRAs, 0.9% in international debt and 0.2% in merchandise. According to CONSAR, AFORES’s resources grew 352% from 2005 to 2016, closing the latter year with resources of MXN3.94trn ($237.5bn).


Two decades after its start, the new pension system has wrought significant changes, adapted to market conditions and generated an average yield of 6.4% by year-end 2016, while the number of accounts managed by AFORES has shown growth of 412%, rising from 11.2m to 57.3m. Resources managed by the 11 AFORES in the system are an attractive investment alternative, as they are managed by experts, grant tax benefits and are diversified instruments. They have historically generated positive yields. The historical performance of the system at the end of 2016 was 11.54%.


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