Consar "positively values" the reform approved by deputies to regulate Afore withdrawals

The National Commission for the Retirement Savings System (Consar) "positively assesses" the initiative approved this Monday in the Chamber of Deputies to regulate unemployment withdrawals from the Afores (annually-funded pension funds).

In a statement, Consar asserted that the reform to Article 191 of the Social Security Law approved this Monday in the lower house will allow for "more organized services without the need for expensive and unauthorized intermediaries that are detrimental to workers."

Since last year, the Commission in charge of regulating the Retirement Savings System (SAR) detected a fraudulent scheme that inflated unemployment benefit withdrawals to historic highs.

The fraudulent practice involved simulating the hiring of a high-wage worker, registering him or her with Social Security for a day, and then being able to obtain a higher unemployment benefit.

This practice was carried out by private firms that, through misleading advertising, offered workers the option of withdrawing thousands of pesos from their savings accounts in exchange for hefty commissions on the amount withdrawn.

"It has been estimated that 68.8% of the amount withdrawn for unemployment benefits is generated by these agencies, which typically charge between 8,000 and 10,000 pesos per worker," Consar explained in its statement.

In response to this practice, at the end of July 2024, Consar implemented a validation mechanism for unemployment benefits, to review and verify the last salary recorded by the worker while contributing to Social Security.

However, even with this mechanism, unemployment benefits continued to increase in the following months.

From January to May of this year, workers withdrew 14.465 billion pesos from their Afores through partial unemployment benefits, a figure that, in addition to being a historic record for the period, represents a 12% increase in real terms compared to 2024.

With the changes approved by the Chamber of Deputies, Article 191 of the Social Security Law will now establish that the unemployment benefit will be calculated using the "average contribution base salary for the last fifty-two weeks" (the last year).

Prior to the reform, the law stated that the withdrawal amount was calculated using the "last contribution base salary," which allowed firms to register the worker with a high salary for a few days, to simulate the situation and thus extract more money from the Afore.

In addition, retirement benefits for those with at least three years' pension will now be based on the worker's contribution history.

This will allow withdrawals above the 10 UMAS (34,395 pesos) limit currently established by law in cases where the savings account balance is high.

"With this modification, the right of workers to use the resources in their individual accounts to alleviate periods of unemployment is respected, in addition to truly making these withdrawals consistent with their salary trajectory," Consar emphasized.

The Commission also highlighted that poor practices in unemployment benefits reduce the amount of a worker's pension and can even result in their ineligibility, since the amount withdrawn from your Afore can result in the loss of weeks of contributions.

The ruling approved this Monday by the Chamber of Deputies was sent to the Senate of the Republic, where it will be analyzed and voted on shortly.