Retirement Savings
Background
What is retirement, what are you going to live on when you retire, and what are you doing to build a dignified retirement?
This topic will review information related to saving for old age and retirement, the benefits of having an individual account in a Retirement Fund Administrator (AFORE) and the importance of making additional contributions to this account, as well as the forms of pension, among other things.
Retirement is defined as the stage in life when a person stops working. Ideally, one should have sufficient savings or a pension by that time to live a peaceful life. However, in order to be able to save for retirement and have a peaceful old age, it is necessary to define a goal, which will allow one to know what one wants to achieve and in what time frame it will be possible to achieve it. It is possible that the contributions that your employer withholds every two months for your individual account alone will not be enough to achieve this goal.
Pensions
One way to ensure that you will have the necessary resources when you retire is the pension, which is the result of the money saved during your working life.
If you contribute to any of the social security institutions, you must have an individual account managed by an AFORE, in which the resources that will allow you to have a pension at the time of retirement are concentrated.
Retirement: Stage of life when you reach the end of your working life, for this stage you must have sufficient savings or a pension to live a peaceful life.
Individual Accounts are those in which bimonthly contributions are accumulated based on the monthly salary. When you start contributing, the contributions will be deposited in the individual account, whether or not you have chosen one. If an AFORE was not chosen, the resources will be allocated to one of the best-performing administrators.
The individual account is made up of the following sub-accounts:
• Retirement, Severance at Advanced Age and Old Age (RCV) sub-account.
• Voluntary Contributions Sub-account.
• Housing sub-account.
On the other hand, another essential element is the AFORES (Instituciones Privadas Administradoras de Fondos para el Retiro), which are private financial institutions dedicated to and specialized in the administration of retirement funds, in other words, they are entities that administer the individual retirement savings accounts of workers.
The National Commission of the Retirement Savings System (CONSAR) is the body in charge of regulating and supervising the AFORES.
CONDUTIPS If you do not know which AFORE you are in, you can consult the CONSAR website: www.e-sar.com.mx (You need to have your NSS or CURP and e-mail address) or contact, free of charge, SARTEL 13-28-5000 (You need to have your NSS or CURP and e-mail address): SARTEL 13-28-5000 (You need to have your NSS at hand).
Self-employed workers
If you are not contributing to the IMSS or ISSSTE, you can also have an AFORE, which will manage the resources deposited in your individual account. There are no minimum or maximum amounts, therefore, you can deposit the desired amount, you only have to verify that the AFORE in which you want to save receives self-employed workers. This is a procedure that you will have to carry out directly in order to register.
Consider that you can also join the compulsory social security system on a voluntary basis and access the benefits and benefits (medical assistance, disability and/or widowhood pensions, retirement in old age (60 years) or old age (65 years), orphanhood and ancestry) for you and your beneficiaries by paying an annual fee. This procedure can be carried out directly at the IMSS subdelegation that corresponds to you according to where you live (you can check it on the IMSS website www.imss.gob.mx/tramites/IMSS).
CONDUTIPS To find out which AFORES offer this benefit, go to www.gob.mx/consar in services provided by the AFORES for independent workers. If you do not contribute to the IMSS or ISSSTE, you can deposit in an individual account. You can deposit the desired amount, you just have to verify that the AFORE you want to save in receives self-employed workers. Or you can join the compulsory social security system on a voluntary basis and access the benefits by paying an annual fee. The procedure is carried out at the IMSS subdelegation that corresponds to your address or consult www.imss.gob.mx/tramites/IMSS. IMSS website.
Did you know that children can now have an AFORE account?
Here are the following steps to start using this financial tool.
• Go to the AFORE that manages your individual account to register an account for a child.
• Present the documents, official identification, birth certificate or passport of the minor or a document that certifies the guardianship of the minor.
• From that moment on, it is possible to start setting savings goals and make the resources grow with voluntary contributions through different channels (AFORE teller window, deposits in shops such as 7-Eleven, Círculo K, Farmacias del Ahorro, or when they go to get groceries at Chedraui or Walmart).
When the child starts working, the resources accumulated in his or her "Cuenta AFORE Niños" will be transferred to the "Cuenta Individual" and will continue to be invested. This will help him/her not to start with zeroes when he/she starts his/her working life.
Have I chosen the right AFORE?
To select an AFORE, the following 3 aspects should be considered:
1. Commissions. This is the fee charged by the AFORES for managing individual accounts (the AFORES, like any other company, charge for their services).
2. Returns. These are the "earnings" or interest that you obtain during the period that the savings are in the AFORE, based on age, the net yield is updated on the 15th of each month. To compare the net yield of the AFORES,
3. Services. AFORE's Attributes and Services Meter (+MAS AFORE)
When choosing an AFORE consider:
1. Commissions
2. Returns
3. Services
Consult: www.gob.mx/consar
Or consult. How to choose the best AFORE the address www.gob.mx/consar
Information Commissions:
https://www.gob.mx/consar/es/articulos/comisiones-vigentes-en-2020?idiom=es
Consult the commissions that the AFORES will charge during 2020. CONSAR [On line 24-01-2020].
Information Net Return Indicator (SIEFORES Generacionales):
https://www.gob.mx/consar/articulos/indicador-de-rendimiento-neto
Net Return Indicator (Generational SIEFORES)
The Net Yield refers to the simple subtraction of the gross yield granted by the AFORE, minus the commission it charges. It is an indicator that allows the AFORES to be compared with each other. Net Return Indicator (SIEFORES Generacionales) [On line 24-01-2020].
How often can I change my AFORE?
In the first instance, it is possible to change the AFORE individual account once a year (only a second change will be possible within the same 12-month period, the first time). After this transfer and the period that has elapsed - and in the event that other AFORES have a higher yield - the next change of AFORE must be made for at least 12 months. Currently, you have the option of changing to the SIEFORE Básica of your choice, other than the one that corresponds to you based on your age.
You can change your individual AFORE account once a year, and you can only make a second change in the same 12-month period, and the next time you change AFORE, you must stay at least 12 months.
The other option is the change to SIEFORE Básica and corresponds to your age.
Procedure for changing SIEFORE:
• The transfer of resources will be made through the portal www.e-sar.com.mx in the option "Selection of SIEFORE change".
• You will fill in a form with your personal details (CURP, AFORE, full name, email, mobile phone).
• Subsequently, the SIEFORE that will be in charge of investing the resources must be selected (the portal will show the investment rules managed by each of the SIEFOREs so that the worker can identify where his or her money is being invested).
Remember that the change can be made once every 3 years and the worker who does not change will remain in the SIEFORE that corresponds to him/her based on his/her age. It is also important for the worker to find out and compare the benefits and disadvantages of changing SIEFORE, as it is an important decision when it comes to the money accumulated during his or her working life.
Check in accordance with the Generational Funds.
The transfer of resources will be made through the portal www.e-sar.com.mx. "Selection of SIEFORE change".
• Fill in the form with personal details.
• Select the SIEFORE that will be in charge of investing the resources (the portal will show the investment rules).
• The change can be made once every 3 years.
• It is important that the worker is informed and compares the benefits.
Voluntary Contributions
It is important to consider that in addition to the resources in the individual account, additional contributions can be made in order to increase retirement savings.
These contributions are:
• Voluntary contributions: Additional deposits to the account that can be withdrawn after 2 or 6 months (short-term voluntary contributions) or after 5 years from the first deposit (medium-term voluntary contributions). Contributions can be made according to the possibilities of each worker, since most AFORES do not establish minimum or maximum amounts and it is possible to save at any time.
• Complementary contributions: Those that can only be withdrawn when you have the right to obtain a pension. These contributions will help to complement the resources destined to the payment of the pension or can be withdrawn in a single payment.
• Solidarity savings: Additional contributions that can be made only if contributions are made to the ISSSTE. In this scheme, the worker may choose to save 1% or 2% and the agency in which he/she works will contribute 3.25% or 6.5% of the base contribution salary, respectively. This option applies to workers who selected the individual accounts scheme for retirement or started contributing on or after 1 April 2007.
How to make voluntary contributions
You can make your voluntary contributions at:
• At the counter.
• Electronic direct debit.
• Through the company or institution where you work.
• On the internet by accessing your AFORE's website (check which AFORES have this service).
• At Bansefi branches.
• Through the Transfer platform and AFORE Móvil.
• 7-eleven shops, Telecomm branches, Extra shops, Farmacias del ahorro and Círculo K, Chedraui, Walmart (you only need your CURP and the amount you wish to contribute). The minimum contribution is $50 pesos.
Through the YASTAS banking correspondent, where you only need your CURP or mobile phone number (only if you have installed the AFORE Mobile App). The minimum amount is $50 pesos.
Account Statements and Partial Withdrawals
The AFORES are obliged to send account statements to the worker's registered address at least three times a year. This document contains information on the balance and movements of the individual account.
Check the details that appear on the account statement in detail (name, address, social security number, etc.), as any error could become a problem at the time of drawing on the resources.
Workers' account statements:
IMSS:
AFORE Generation: If you started contributing to the IMSS on or after 1 July 1997.
Transition Generation: If you contributed to the IMSS before 1 July 1997 and continue to contribute after that date.
ISSSTE:
AFORE Generation: If you chose the Individual Accounts pension scheme (Pension Voucher crediting) or started contributing to ISSSTE from 1 April 2007.
Tenth Transitory: If you chose the previous pension scheme (established in the Tenth Transitory article of the ISSSTE Law) or did not choose the type of scheme.
MIXED: If you have contributed to both the IMSS and the ISSSTE and your retirement savings generated by contributing to both institutions are in your individual account.
See your new account statement:
https://www.gob.mx/consar/articulos/lo-que-necesitas-saber Here you can find what you need to know about the main topics of the Retirement Savings System (SAR) [Online 24-01-2020].
There are two types of partial withdrawals that can be made from the AFORE account, unemployment or marriage.
Unemployment. In this case, you can make a partial withdrawal of between 30 and 90 days maximum of your Base Contribution Salary. The amount depends on the Base Contribution Salary, the time you have had the individual account and the weeks of contribution. The requirements to qualify for this benefit are: apply for it 46 days after you have become unemployed. This benefit can be granted every 5 years. If this benefit is used, weeks of contribution will be deducted, which could postpone retirement; however, it is possible to recover them if additional voluntary contributions are made.
Marriage. If the user has married, he/she can make a withdrawal for expenses for this concept equivalent to 30 days of the Minimum Wage in force on the date of the celebration of the marriage. This can be requested by workers who have a minimum of 150 weeks of contributions as of 1 July 1997, who have contracted a civil marriage, who have not previously received the withdrawal and who are currently insured. Workers who are no longer working may do so within 90 working days of leaving the IMSS. In this case, no contribution weeks are deducted for this assistance, and it can only be requested once. It only applies to IMSS workers.
Other important aspects
Preservation of rights (IMSS): Persons who no longer contribute to the compulsory scheme will retain their rights to obtain a pension under the disability and life insurance scheme for a period equal to one quarter of the number of weeks of social security contributions at the date of leaving the scheme.
Recognition of rights (IMSS): Persons who cease to contribute to the compulsory scheme and subsequently re-enter it will have their contribution weeks recognized as follows:
• If the period in which they did not contribute is not more than three years, they will be recognized immediately.
• If the period in which you did not contribute is more than 3 years but less than 6 years, you will have to contribute 26 weeks for recognition.
• If the period in which you did not contribute was longer than 6 years, you will have to contribute 52 weeks for the recognition of the weeks.
Preservation of rights (ISSSTE): The worker who is dismissed due to resignation, termination of the contract or who is on leave without pay, but who has provided services for a minimum of six months, will retain the right to receive health benefits for the following two months.
Forms of pension
• Life Annuity: An insurance company specialized in this product will pay the pension.
• Programmed Withdrawal: The AFORE will pay the pension.
• Guaranteed Minimum Pension: If the resources are insufficient, you will be entitled to a Guaranteed Pension charged to the accumulated balance in your Individual Account; once the resources are exhausted, the Federal Government will pay your pension (1SMGV).
• Denial of Pension: This is extended to a worker when, on reaching retirement age, he/she has not fulfilled the requirements in terms of weeks or years of contribution, necessary to enjoy a pension.
SIEFORES Generacionales
As of December 2019, the investment mechanisms for retirement savings have changed. The SIEFORES Básicas evolve to a SIEFORE Generacional modality.
SIEFORES are investment funds where the savings of workers are deposited throughout their working life and who manage these resources are private companies called Administradoras de Fondo para el Retiro (AFORE).
How will they work? In the current model, each AFORE has five investment funds that are allocated to individuals according to their age. It is important to know that each SIEFORE has investment rules and limits for each type of instrument in which the money is invested.
In this way, the money saved is invested in different products. The younger a group is, for example, SIEFORE Básica 4, the more money it invests in long-term instruments, with higher returns but higher risk.
As the group gets closer to retirement, in this case SIEFOREs Basic 1 and 0, their savings are invested in short-term instruments, with a lower level of risk, although they generally earn lower returns.
What will be the difference with the change to the Generational Funds?
According to the National Commission of the Retirement Savings System (CONSAR), the fundamental changes in this new model or scheme will be:
There will no longer be five SIEFOREs, the number will increase to 10. The resources of each worker will be assigned to the SIEFORE associated with his or her date of birth and will remain there throughout the person's working life. Each SIEFORE contemplates an investment regime, which adapts to the worker's age and becomes more conservative as he/she approaches retirement. Since it is now possible to switch from one SIEFORE to another every few years, the time that a worker's account participates in an investment mechanism is also reduced. Now, with the generational SIEFORE, there will be the opportunity to generate higher returns on certain investments, especially those that require a longer maturity time (such as engineering, and infrastructure works).
The Mexican Association of AFORES (AMAFORE) points out that the Generational Funds scheme is already implemented in five countries in the world: the United States, Hong Kong, Australia, the United Kingdom and New Zealand, with good results. The change does not represent a risk for savings and broadens investment possibilities.
CONSAR specifies that in accordance with this new provision, the allocation of each SIEFORE, according to the worker's age, will be as follows:
The general provisions, which establish the new Investment Regime to which the SIEFORES must be subject, began to operate as of 13 December 2019.
CONDUTIPS: It is not necessary to request a change to this investment regime, as it will be made automatically. The changes will be reflected in the statements of account at the time these provisions come into effect. If you have any doubts or require any clarification on the change of SIEFOREs system, you can call Sartel: 55 13 28 50 00, free of charge from anywhere in the country or consult the CONSAR website at: www.gob.mx/consar
