Pensions at a Glance 2025: Mexico
Table of contents
This country note shows how Mexico compares with other OECD countries in Pensions at a Glance 2025. This edition covers recent pension reforms and includes a focus on gender pension gaps.
The Mexican population is still very young by OECD standards and the total fertility rate at about 1.9 remains well above the OECD average. However, because the total fertility rate has fallen sharply over the last decades, as in other Latin American countries and Türkiye, ageing will soon be very fast. Like Costa Rica, Mexico combines high levels of average relative income and high income inequality among those aged 65+.
In May 2024, Mexico introduced a large earnings-related top-up to the mandatory funded defined contribution (FDC) scheme, which changes the nature of its pensions by severing the link between contributions and benefits for a large part of the population. The top-up guarantees that pensioners receive 100% of their last monthly salaries, up to the average monthly salary at the time of the top-up’s introduction. That ceiling is adjusted to price inflation, so over time the top-up is likely to erode in relative terms, first for high and average earners, but ultimately also for people with lower earnings. The new benefit was created because pensions are currently low as the pension system is still maturing, the current contribution rate is low and large informality erodes coverage. This new guarantee applies since July 2024 to everyone aged 65 or over receiving an FDC pension, which requires a contribution period that is increasing to 1 000 weeks in 2031. This means that this will generate a very high pension relative to lifetime earnings even for workers with short contribution periods. Using last earnings for private‑sector workers’ pensions is very unusual because it creates many inefficiencies, including large disincentives to take lower-wage jobs after an employment loss in the second part of the career. Moreover, Mexico has extended mandatory coverage to digital platform workers from June 2025 after the extension to domestic workers in 2022.
Measures legislated over the last two years have the largest positive impact on future replacement rates in Mexico, as well as in Chile and the Slovak Republic. While Mexico’s future replacement rates for average and low earners were close to the OECD average, they have now increased by 18 and 47 percentage points (p.p.), respectively. Based on legislated measures, net replacement rates for full-career workers entering the labour market at age 22 in 2024 equal 132% at half the average wage and 80% at the average wage against 76% and 63%, respectively, in the OECD on average.
How this reform will be financed over time is unclear. In the face of such a big boost in pension benefits, mandatory contribution rates have not been raised further. Following the 2020 reform, mandatory contribution rates are increasing steadily from 6.5% back then to 8.5% currently and 15% in 2030, mainly to finance FDC accounts. This compares to an OECD average of 18.8%, with a maximum of 33.0% in Italy. The introduced top-up is supposed to be financed from a variety of sources, several of which are one‑time transfers. The scheme would partially be financed from sleeper accounts – i.e. unclaimed accounts of which the owner cannot be contacted –, which is unlikely to provide a sustainable source of funding. Moreover, the primary way to deal with sleeper accounts should be to make efforts to identify the owners of those accounts and move their funds to their main accounts. Hence, it is unclear how the financing measures foreseen for this top-up can cover the promises made in the longer term.
Net replacement rate, normal retirement age and contribution rate
Difference between the average pension of men and women relative to the average pension of men
Source: Figure 2.1.
Differences in pension levels between men and women are very large in Mexico. Women receive monthly pensions that are about one‑quarter lower than men’s on average across OECD countries, ranging from less than 10% lower for example in Czechia and Slovenia to more than 35% lower in Austria, Japan, Mexico, the Netherlands and the United Kingdom. In Mexico, such a large gender pension gap (GPG) contributes to the large income inequality in old age. Moreover, while the GPG is steadily declining in the vast majority of OECD countries, the large GPG has even increased in Mexico over the last decades. However, there is no correlation across countries between the GPG and the gender gap in average disposable income among people 66 or older, which takes into account other sources of income, household compositions and income sharing within households. In Mexico, the latter is lower than the OECD average, 7% compared to 10%.
Mexico has among the highest gender gap in lifetime earnings in the OECD. Gender differences in lifetime earnings are typically the main driver of the GPG. They vary from 14% in Lithuania to 50% or more in Costa Rica, Japan, Korea, Mexico and Türkiye. Due to lower employment rates among women than among men for all age groups in most OECD countries, the gender gap in expected career duration was almost 6 years lower for women than for men in the OECD on average in 2023. It exceeds 15 years in Colombia, Cost Rica, Mexico and Türkiye, while it is less than 2 years in the Baltic countries and Finland. Very large gender gaps in Colombia and Mexico are driven by both exceptionally long careers of men and strikingly short careers of women. Moreover, Mexico has also among the largest gender gap in working hours. In some countries, for example Korea and Mexico, long working hours of full-time employees are incompatible with women’s disproportionate responsibility for unpaid work.
If the new pension top-up legislated in 2025 remains in place over time, differences in lifetime earnings may not to a large extent be transmitted to pensions, which would reduce the GPG. However, a caveat to this limited transmission comes from the impact of the large labour market informality, which reduce pension coverage, among women, in particular as about 20 years of contributions will be required to be eligible to the top-up. Also, while over the last 30 years pension eligibility conditions have converged between men and women in many countries that maintained gender differences, Mexico introduced in 2025 an earlier access to residency-based basic pensions for women at age 63, to be expanded at age 60 in 2026, while men remain eligible from age 65 since 2021 when the eligibility age was reduced for both men and women from age 68. This benefit is equivalent to about half the residence based basic pension paid to people aged 65+. It terminates when turning 65, when women receive the same basic pension as men. It is supposed to recognise women’s unpaid work as well as improve their economic autonomy.
High levels of old-age relative income and inequality
Population is currently young but will soon be ageing very fast
Mandatory contribution rates are currently low but increasing
With the recent reform, replacement rates will be very high
Contact
Hervé BOULHOL (✉ herve.boulhol@oecd.org)
Andrew REILLY (✉ andrew.reilly@oecd.org)
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The full book is available in English: OECD (2025), Pensions at a Glance 2025: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/e40274c1-en.
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