OECD Warns Mexico’s New Pension Fund Lacks Long-Term Stability

The Organisation for Economic Co-operation and Development (OECD) has raised concerns about the long-term financing of Mexico’s Pension Fund for Well-being (FPB), warning that the program depends on temporary resources that may not be sustainable.

In its Pensions at a Glance 2025 report, the OECD noted that the FPB is funded through various sources, many of which involve one-time transfers. As a result, “it is not clear how the financing measures planned for this complement will be able to cover the promises made in the long term.”

Concerns Over Inactive Accounts

The OECD highlighted that part of the FPB’s financing comes from inactive Afore accounts, unclaimed savings held by workers who cannot be located. While these funds “can raise money temporarily, they are unlikely to provide a sustainable source of financing.”

The organization argued that the government and the pension regulator should prioritize identifying account holders and transferring their balances to their main accounts, rather than relying on these resources to fund benefits.

The FPB was created to supplement certain pensions so that workers who meet the minimum contribution weeks and earn less than the average IMSS salary (MX$17,364 per month) can receive 100% of their last salary upon retirement.

The OECD noted that the new benefit was introduced because current pension levels are low due to the system’s gradual maturation (the defined contribution scheme began in 1997, meaning older workers have incomplete contribution histories), a low contribution rate, and high levels of informal employment.

The new complement took effect in July 2024 for individuals aged 65 and older who receive a defined contribution pension. Eligibility requires a minimum of 825 contribution weeks in 2024, rising to 1,000 weeks by 2031. The OECD emphasized that, under this structure, “even workers with short contribution trajectories could receive very high pensions.”

The report also noted that the salary threshold for receiving the complement will be adjusted annually for inflation. Over time, the relative value of the complement will decline, first for middle- and higher-income workers, and eventually for those earning below the average.

The OECD concluded that the new scheme effectively overrides the normal functioning of the defined contribution (DC) system and creates a partially pre-funded defined benefit (DB) entitlement equivalent to 100% of the last salary.

It also stressed that because the Universal Pension for Older Adults (PUAM) will continue to be paid to those receiving the complement, “replacement rates for low-income workers significantly exceed 100%.”

Afore Unemployment Withdrawals Hit Record High

Withdrawals from Afores due to unemployment have already exceeded the total withdrawn in all of last year, reaching a record high for a January–October period. According to data from the National Commission for the Retirement Savings System (Consar), workers withdrew MX$31.814 billion (US$1.72 billion) for unemployment during the first 10 months of the year, surpassing the MX$30.728 billion withdrawn throughout 2024. The amount reflects a 24% increase compared with the same period last year.