MEXICO CITY, July 23 (Reuters) - Mexican workers will see a major boost to their retirement benefits after the government and private sector ironed out the details of a pension reform that lawmakers are expected to pass into law by early 2021.
Following are key changes and aspects of the planned reform according to the Mexican finance ministry:
- Retirement benefits for the average worker are forecast to increase by 40%.
- Under the plan, total contributions will rise from 6.5% to 15% of salary over eight years, and employer contributions will rise from 5.15% to 13.87%.
- Once in effect, workers that meet the requirements of 750 weeks worked and 60 years of age will immediately be guaranteed a pension. Now Mexicans need to work at least 1,250 weeks to be eligible for a pension.
- Some 20 million Mexicans will be impacted by the reform.
- The plan also reforms the investment regime for Mexican pension funds, also known as Afores, in order to diversify risk and allow for investments in infrastructure projects.
- The reform includes a clause to review the pension system’s performance every 10 years and recommend needed changes.
- Included is an initial two-year grace period wherein employer contributions will not increase to give firms some breathing room considering the economic fallout of the coronavirus pandemic.
- Further negotiations with pension funds will be needed so they voluntarily reduce their commissions in line with international levels. Afores, managed some 4.3 trillion pesos ($192.60 billion) in savings at the end of June.
- The finance ministry also wants to make it easier to make withdrawals from voluntary worker savings. Currently, withdrawals are allowed only once every six months. (Reporting by Anthony Esposito; Editing by Cynthia Osterman)