Afores’ commissions must be capped.- experts

Note published in Reforma, Negocios [Business] Section by Verónica Gascón.
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Note published in El Norte, Negocios [Business] Section by Verónica Gascón.
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Note published in Mural, Negocios [Business] Section by Verónica Gascón.
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Commissions charged by Afores [Retirement Funds Administrators] in Mexico (0.98 percent in average) are the highest in the world and should not be higher than those found in other countries in the same stage of development or time of defined contribution, warned an analysis conducted by labor lawyers.

“The reform is absolutely necessary to avoid a serious social and humanitarian problem. With this, the minimum guaranteed pension is expected to be of 0.70 percent of the General Minimum Wage, which covers the minimum well-being income.

“An increase in contributions becomes mandatory to be able to provide pensions to the workers in the mid-term, taking into account that we are entering into the stage of old age of our population”, stated Ricardo Martínez of the De la Vega y Martínez Rojas Firm.

He added that the right thing to do is capping Afores’ commissions, as they are the highest in the world.

“The way things are, they reduce workers’ savings by approximately 12 percent, which is very high; if they want to compete, let them do it by reducing commissions rather than increasing them, thus negatively affecting workers”, he stated.

He said that there are 66 million individual accounts, and only 21 million of them are active. It is important to note that accounts that are considered to be inactive are the ones that stopped receiving contributions for more than three consecutive months.

He added that 75 thousand workers insured solely by the Afore will reach retirement age next year, and only 5 thousand of them will have the right to a pension.

“Given the current unemployment scenario, the lack of stability in the labor market, the lack of stability in jobs and low salaries, the excessive growth of informality together with the severe crises that we have suffered during the last 25 years, 76 percent of workers insured solely by the Afore will not have the right to a pension due to their failure to meet the mandatory requirements by law to obtain one; they may not have completed the one thousand 250 weeks of payment of social security dues or they do not have sufficient funds to generate the minimum guaranteed pension, which is of approximately 3 thousand 274 pesos per month”, he stated.

Under this scheme, said the expert, the existence of the reform in pension matters, under the following terms, is important: reduction of the weeks of compulsory payment for retirement from one thousand 250 to one thousand, but starting with 750, increasing gradually; gradually increasing the employer’s contribution from 5.50 percent to 13.875 percent of the base salary for the payment social security dues for retirement, old-age unemployment insurance and old age areas.

This increase will start on January 1st, 2023 and will continue until 2030.

And that Afore commissions will be the average of those of the United States of America, Colombia and Chile, as long as this means a reduction, otherwise, the current average will remain unchanged.