Pension Fund for Wellbeing raises doubts about benefits

The legal reform for the creation of a Pension Fund for Welfarerecently approved in the committees of the Chamber of Deputies, has raised significant concerns due to the absence of clear commitments on pension equivalence with the latest base contribution salaries of the workers.

This is indicated by an analysis of the Mexican Institute for Competitiveness (IMCO)which also points out the lack of a defined mechanism for claiming Afore resources that would be transferred to this new fund.

Context of the reform:

The diagnosis of the opinion, released this Tuesday by the IMCO, highlights that the proposal not only lacks clarity in the processes to claim fundsbut could also result in excessive administrative procedures and long waiting periods for affected workers.

This situation could seriously compromise the effectiveness of the initiative which will be debated next Wednesday in the plenary session of the Chamber of Deputies.

Initiative details:

The legislative proposal, presented by the Morenoist deputies Ignacio Mier Velazco and Angélica Ivonne Cisneros Luján on April 4, 2024, seeks establish a mechanism to supplement pensions of workers whose retirement amounts are less than or equal to 16,361 pesos.

This fund has similarities with another proposed by the Executive on February 5with the difference that Mier and Cisneros' version requires only a simple majority for its approval, which the Morena party currently has.

Commitments and limitations:

According to the IMCO analysis, The initiative does not guarantee that the pension received by workers is equivalent to 100% of their last base contribution salary, limiting this potential benefit to certain sectors.

Additionally, it specifically focuses on private sector employees who began contributing to the IMSS since July 1997 and in public officials affiliated with the ISSSTE since April 2007.

The effectiveness of the fund will depend on the availability of sufficient resourcesa condition that adds an additional layer of uncertainty for potential beneficiaries.

Financial and operational implications:

The fund will be financed with resources from the Afores and the National Institute of Housing for Workers (Infonavit), which will be transferred when the workers reach the age of 70 for the IMSS and 75 for the ISSSTE, as long as they do not maintain an active employment relationship.

However, the IMCO warns that The details on how workers will be able to claim these resources are not defined.which could generate potentially lower returns than those that could be obtained if the funds remained under the direct management of the Afores and Infonavit.

Given these risks and lack of claritythe IMCO has recommended the convening of an open parliament involving experts and affected sectors to discuss and potentially improve the proposal.

This measure would seek to ensure that workers' rights to their pensions are effectively protected and that the pension system operates fairly and transparently.

With these considerations, the legislative debate promises to be intense, reflecting the complexity and importance of guaranteeing a robust and equitable pension system for all Mexican workers.