Many Mexicans do not have a pension plan and do not abide by traditional economic investments. However, the number of people with pensions in México City are much higher then the surrounding countryside. Following the economic crisis of 1994 and the sudden devaluation of the Mexican peso, Mexico changed in many respects. The crisis was marked by a combination of poorly supervised banking, growing public debt and fluctuating foreign interest rates that severely damaged the country's business infrastructure. The catastrophe underscored Mexico's fragile economy and set off major tremors in the pension area. But the crisis also triggered some major reforms moving the country from a public to a private pension system. This evolving retirement landscape offers multinational companies opportunities to restructure their retirement arrangements around solid fiscal principles and adapt to the changing needs of employees while aligning retirement benefits with their own broader business objectives.
Mexico's pensions are mainly held in individual retirement accounts called Afores, for Administradores de Fondos para el Retiro, or retirement fund administrators. Individual retirement accounts contain four separate sub-accounts which are:
- Retirement, lay-off and old age (RCV, "Retiro, Cesantía y Vejez" in Spanish): This sub-account contains funds contributed by the employer, federal government and employee.
- Voluntary contributions: An employer may also contribute extra funds voluntarily. Additional contributions may be done directly with the Afore or automatically deducted from the employer's salary.
- Housing: This is a sub-account into which employers contribute an equivalent of five percent of the employee's salary. Funds are deposited with the INFONAVIT through the Fondo Nacional de la Vivienda ("National Housing Fund") and the Afore only registers contributions and balances.
- Complementary contributions: This sub-account will contain additional funds contributed by the employer or the employee to increase the pension balance. These funds can only be withdrawn after retirement.
Individual plans like 401K's can be purchased individually from investment companies like:
Most companies offer step-by-step instructions for investors to secure a personalized plan to create savings for the future. For a complete primer on investing in your future, try Retirement Guide
Update 6/09/2008
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