The Mexican government’s spending on contributory pensions represented 18 of every 100 pesos of the federal public budget during 2025, a historical maximum.
According to data from the Ministry of Finance and Public Credit (SHCP), spending on contributory pensions represented 17.9% of the government’s total net spending from January to November 2025.
From January to November of last year, spending on contributory pensions was 1,512 billion pesos, a growth of 8.7% in real terms compared to the same period last year.
Jorge Cano, coordinator of the public spending program at the México Evalúa organization, explained that although it is normal for pension spending to grow in countries whose population is aging, in the case of Mexico there is concern that pension liabilities grow at a faster rate than government income.
“If there is no growth in income, there will be less and less fiscal space and the government will have to pay pensions at the cost of more cuts in areas such as education, health and security,” he said.
Contributory pensions are those granted to those retirees who, during their working life, had to contribute (or their employers did) to social security institutes to finance their pensions or those of other retirees.
On the other hand, non-contributory pensions are those in which the person receiving them did not have to contribute any share of their salary and that are financed entirely by the government, such as the Universal Pension for the Elderly and in 2025 they represented 6.13% of total spending.
The category of expenditure on contributory pensions includes, for example, the pay-as-you-go pension systems of the Mexican Social Security Institute (IMSS) and the Institute of Security and Social Services for State Workers (ISSSTE).
In fact, these two pension schemes are the ones that represent the greatest burden on the country’s public finances, explained Jorge Cano.
However, the government must also pay pensions for retirees from Petróleos Mexicanos (Pemex), the Federal Electricity Commission (CFE), Luz y Fuerza del Centro, as well as railroad workers and the armed forces.
Furthermore, the total pension expenditure also includes the contributions made by the government to the Afores of some workers, although this item represents less than 5% of all pension expenditure, Cano added.
Of the programmable spending, spending on pensions represented 25.8 percent.
Programmable spending is that which the government allocates to direct public programs and services for the population (such as education, health, infrastructure), to the functioning of institutions and to the well-being of the population.
While non-programmable spending is that which is practically already committed, such as debt or contributions to states and municipalities.
Reducing the retirement age will put more pressure on finances
On the other hand, the Mexico specialist Evalúa pointed out that recent changes to the country’s pension system, such as the gradual reduction of the retirement age for workers who contribute to the ISSSTE, will increase the government’s pension liability.
Last year, President Claudia Sheinbaum published a decree in the Official Gazette of the Federation (DOF) to reduce by three years the minimum retirement age of workers in the ISSSTE transitional tenth.
Thanks to this agreement reached by the federal government and the teachers of the National Coordinator of Education Workers (CNTE), the minimum retirement age will be frozen at 56 years for women and 58 for men until 2028, when it will begin to be reduced every three years.
In 2028 it will be reduced to 55 and 57 years; in 2031 to 54 and 56 years, and finally, in 2034 it will be 53 years for women and 55 for men.
With the agreement, the progressive increase in the retirement age that was to end in 2028 derived from the reform of the ISSSTE Law of 2007 is reversed, through which State workers were introduced to the pension system of individual accounts in the Afores.
When the 2007 reform was carried out, those who had worked before it came into force (on April 1 of that year) were given the choice between joining the new system in the Afores or staying in the old pay-as-you-go system.
Those who decided to stay in the previous system (which was 90%) were incorporated into the so-called temporary tenth modality, under the condition that the minimum retirement age would be increased every two years.
In 2010, before it began to increase, the minimum retirement age for women was 49 years and for men it was 51.
According to federal government estimates, the reduction in the retirement age would have a fiscal cost of more than 36,000 million pesos between 2025 and 2030 alone.
However, specialists and the same ISSSTE projections warn that the peak of transitional tenth retirees will arrive between 2030 and 2040, so it would be in that decade when the State will have to spend more resources due to the reduction in the retirement age.
