Exploring the 5 Main Types of Retirement Plans
This article provides an overview of the five primary types of pension schemes, including government programs, employer-sponsored plans, guaranteed pensions, savings schemes, and voluntary options. It explains each scheme's features, eligibility, and benefits, helping individuals understand their retirement options and plan better for the future. The reforms and regulations aim to improve financial security for retirees and ensure sustainable pension systems.
Exploring the 5 Main Types of Retirement Benefits
Over the years, pension systems have experienced gradual reforms aimed at improving citizens' financial security after retirement. Government initiatives focus on enhancing workforce welfare, maintaining core pension structures, and introducing new schemes. Understanding different pension options is essential for individuals planning their retirement, as each plan operates uniquely.
1. Senior Citizens’ Welfare Pension (Pensión para el Bienestar de las Personas Adultas Mayores)
This program benefits individuals aged 65 and above who are residents and born in the country, including Indigenous populations. Non-Indigenous seniors aged 68+ living here also qualify. Those between 65-67 can be registered if they were active beneficiaries as of December 2018.
Community health workers visit homes for registration. Applicants must show ID, proof of residence, and fill out an application form.
Participants aged 65-67 are listed in the Active Beneficiaries Registry. The program offers three core benefits:
Payments are made directly to beneficiaries via bank transfer, cash, or other methods, every two months.
A one-time payment is given to a representative or caregiver if the original beneficiary passes away.
The program involves coordinated efforts to ensure social protection and comprehensive care for seniors.
Benefits are revoked if eligibility is lost, false information is provided, or if beneficiaries voluntarily withdraw.
2. Employer-Sponsored Pension PlansEmployers contribute to social security, housing funds, and retirement schemes through private institutions called AFOREs (Retirement Fund Administrators). These financial entities manage employee retirement accounts, regulated by the National Commission of the Retirement Savings System (CONSAR). Employees can choose their preferred AFORE or be assigned one if they miss deadlines, aiming for optimal returns. These administrators invest contributions into specialized funds called SIEFOREs, maximizing workers’ retirement earnings.
3. Minimum Pension Guarantee (MPG)
This component includes both voluntary and mandatory schemes. Workers are required to contribute periodically to specific pension funds, ensuring a safety net. The government aims to secure a minimum income, targeting a 40% replacement rate, paid after a minimum of 750 weeks of contributions (about 15 years). The contribution rate is expected to rise to 1000 weeks (roughly 19 years) in the future. Employers’ contributions are set to increase from 6.5% to 15% by year's end.
4. Retirement Savings Program (SAR)
Supervised by CONSAR, SAR aims to regulate and oversee individual pension savings. It ensures contributions are properly invested, provides regular account statements, and monitors fees charged by funds. Employers contribute a percentage of wages monthly to employees' retirement accounts, helping build their pension funds efficiently.
5. Voluntary Personal Retirement Plans
Self-driven pension schemes allow workers and freelancers to make voluntary contributions. Members can allocate savings toward retirement accounts and increase their future pensions accordingly. Withdrawals are permitted at any time, even during employment, offering flexibility. The contribution rates and amounts may change over time, but the fundamental structure remains consistent, evolving gradually to meet changing needs.
