What’s going on with the Afores in Mexico and when is the best time to change admins

The bone retirement resources Mexicans affiliated with IMSS and ISSSTE are in charge of a pension fund administrator (Before), which protects them and invests in the financial markets. The worker can change administrators, which is also recommended by personal finance experts.

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However, recently the Before the suspension of trade imposed by the National Commission for the Retirement Savings System (Consar) expressed doubts about the transfer of resources to another administrator. The agency indicated that this measure – which could be extended until the middle of the year – was taken before the unfavorable market conditions which also produced fear.

That is why GlobeLiveMedia México consulted Gerardo López Jiménez, lawyer and professor expert in pensions, who exposed the truth behind the ban on transfers from one Afore to another that Consar imposed and shared advice so that workers make an intelligent decision when transferring their savings to another administrator.

The suspension of transfers from one Afore to another does not mean that workers’ savings are in danger (Photo: Pixabay)

Initially, Gerardo López defined the Afores as “financial institutions whose sole function is manage and receive and invest for retirement workers affiliated to both Social Security and ISSSTE”.

“These savings come from social security contributions paid by employers, workers themselves and the state as part of all the contributions that are paid bi-monthly to both the IMSS and the ISSSTE in the case of affiliated workers.”

On the Before the suspension of trade due to market conditions, clarified that does not mean savings are at risk. In addition to workers can request a change of Afore, although this movement will not be effective immediately.

“Yes, the transfer order is taken, but the Afore is also summoned not to divest, that is to say not to sell the shares of this investment company but to wait three or four months for the financial markets to stabilize and make the transfer effective. ”

In this sense, the change of director is a decision that workers should consider now. Gerardo López estimates that in the long term -over a period of 25 to 30 years- the difference in income and capital between a person who makes appropriate changes can be between 20 and 30%.

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What the lawyer recommends is consider changing Afore at least once a year and the ideal is to think about it during the first two months. The worker should be reminded that in January he should receive his statement of account, which includes an indicator of net income.

The net performance indicator is a tool to determine if your Afore is right for you (Jovani Pérez/GlobeLiveMedia México)

He indicator considered commission fees (amount institutions charge for money management) and performance to qualify each Afore. This index ranges from 1 to 10. if the Afore you currently belong to is greater than 5, the transfer would not be expedient.

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In exchange If you are in a mid-down afore, what is practical is to consider changing as it charges a high commission and gives low returns.

The indicator can also be viewed in the following link. To access the information, you must identify the generational group to which you belong by date of birth, since the data is organized in blocks.

For example workers born between 1990 and 1994 belong to SIEFORE Básica 90-94. The other SIEFOREs are organized under the same regimewith the exception of those that include persons born after 1995 and persons aged 60 or over, respectively referred to as SIEFORE Básica Inicial and SIEFORE Básica de Pensiones (SBO).

There Temporary suspension of exchange They are due to the fact that, according to López, 2022 has been difficult to invest, which has also affected the Afores. Directors had capital losses (losses) most of the yearwhich has changed in recent months.

“However, it was in the first 10 months of the year, in the eleventh and twelfth month, losses ceased to be generated and income or capital gains began to be generated, that is, say that the savings were no longer lost but rather began to be recovered”.

In this sense, the lawyer explained that the suspension imposed by Consar is not due to adverse market conditions and threatened economies Currently. Although he felt that the past year The ace losses could result in a reduction of up to 25% of retirement fundsin 2023 the situation has changed.

What Consar has done is establish an initial period of 3 months for administrators to recover what has been lost, now that financial market stability is returning.

He pointed out that the economies of the workers they are not in danger since they are owners of shares in which the money is invested in order as long as they are not put on sale, they have no direct impact on the resources saved.

“Resources are not lost because workers own shares in investment companies. As long as these shares of the investment companies are not sold, they can recover their value,” he said.

López added that historically given (variable amount and subject to market conditions) were higher than inflation since their inception in 1997, for which he assured that “what could have been achieved in long-term performance is recovering and recovering very well”.

He even stated that in this regard they have advantage over banks, because in the latter, returns or interest are offered in gross terms, that is, without taking inflation into account. It is in this context that the voluntary savings at Afores It has become a financial instrument of interest.

Workers can perform voluntary contributions to your Afore from 50 pesos, for which they only need an individual account ID with CURP or social security number. They can do this through bank accounts, in Afores boxes and in some convenience stores, in addition to the fact that they access the worker’s account without commission rebate.