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Why Did the Afores Fall to the Minimum?

Autor:   •  July 26, 2017  •  Creative Writing  •  604 Words (3 Pages)  •  608 Views

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Why did the AFOREs fall to the minimum?

The Afore is a term that we use in our daily life because it's part of it, all the now that an AFORE (Retirement Fund Administrator) is a private financial institution that is in charge of managing the funds for the retirement of the workers affiliated to the IMSS and the ISSSTE, named by its acronym on Spanish for "Administradora de Fondos para el Retiro"

Each worker has a personal account that it assigned to them, in which the contributions made throughout their working life are deposited, where the resources (quotas and contributions) are accumulated, that periodically the boss, the government and the worker does.

With the objective of increasing the return of the savings invested by each worker, in July of 1997, the Individual Capitalization System was launched, in which workers make contributions to private financial entities called Afores.

All the contributions are calculated based on the base salary of contribution, up to a maximum limit of 23 minimum wages. Each Afore is subdivided into four sub-accounts: Retirement, Old Age and Severance, voluntary contributions, household and Additional or complementary contributions

The retirement, old age and severance:

The contribution to this subaccount is mandatory and is made by:

The boss: every two months contributes 2% of the base salary of contribution for retirement and 3.15% of the base salary of contributions for unemployment in old age

The federal government, which contribution occurs under the concept of Social Fee, which contributes 0.225% of the basic salary of contributions for unemployment and old age on every two months’ basis and an amount equivalent to 5.5% of the general minimum wage.

The worker, will contribute bimonthly 1.125% on the base salary of contribution

In total to this fund each month, the balance increases with a percentage of between 8% and 8.5% of the worker's salary. The worker can access this balance until after the age of 65, which in Mexico is the age stipulated by law for retirement.

For a worker, it is important for an Afore to offer good returns, since this utility allows the savings that are destined for retirement to have an added value; Then, the higher the yield, the greater the amount of pension, but if the afore gives lower yields, the amount of the pension could be low.

As the yields are the "profits" or "interests" that your AFORE earns you by investing your savings.

The international financial markets experienced an episode of volatility (price instability in the financial markets), and as a result of this, world interest rates, like those of Mexico rose, especially long interest rates Term,

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