A change of course in federal pension policy
The Federal Expenditure Budget Project (PEF) for fiscal year 2026 presents a significant change in the allocation of resources destined for pension spending. For the first time since 2018, a specific contraction is observed in the amounts allocated to the largest social security institutions in the country: the Mexican Social Security Institute (IMSS) and the Institute of Security and Social Services of State Workers (ISSSTE). Although the global amount for pensions will reach 2.3 trillion pesos, representing a general increase of 3.7 percent, this growth is the lowest recorded in the last seven years, well below the historical average of 8.5 percent.
The redistribution of expenditure: contributory vs. non-contributory
The detailed analysis carried out by the Center for Economic and Budgetary Research (CIEP) detects a clear divergence in the allocation of funds. While the budget for contributory pensions – those in which there is a prior contribution from workers, companies and the Government – will experience a marginal increase of just 0.05 percent, concentrating 1.7 trillion pesos, the non-contributory pensions administered by the Ministry of Welfare will receive a substantial increase of 13.5 percent, reaching 619,703 million pesos.
Within this reallocation, the IMSS will suffer a budget reduction of 2.5 percent and the ISSSTE of 2.3 percent for its pension programs. This decision is particularly notable when considering the demographic context: both institutions face a constant annual growth of approximately 3 percent in their pensioner base, a phenomenon driven by the progressive aging of the population. The CIEP describes the modest increase proposed for this item as “not very credible”, stressing that pensions must be updated, at a minimum, in accordance with inflation and inherent demographic pressure.
The exponential growth of wellness programs
The budget finds a counterweight to the reductions in social security in the notable growth of direct transfer social programs. The most significant is the Women’s Welfare Pension, intended for women aged 60 to 64, whose budget increases by 266 percent. This fiscal expansion seeks to expand coverage to benefit approximately 3 million women within that age range, a central objective of the current administration’s social policy.
Other programs of the Ministry of Welfare also register considerable increases: the budget for the Pension for Older Adults will grow by 5.2 percent, while resources for the Pension for Persons with Disabilities will increase by 20.8 percent. This approach reflects an explicit political prioritization towards non-contributory supports, which generates a debate about long-term sustainability and the balance between different social protection systems.
Pressure on public finances and future challenges
The magnitude of pension spending, which is equivalent to 2.3 times the budget allocated to health, 1.9 times that of education and 1.8 times that of investment, continues to exert structural pressure on the nation’s public finances. The CIEP warns that this disproportion prevents adequate financing of other fundamental constitutional rights. As an illustrative example, the Government proposes spending 2.1 times more on pensions than on all the programs grouped in Transversal Annex 18, intended for the protection and development of girls, boys and adolescents.
Given this scenario of inequality in allocation and the future unsustainability of spending, the research organization points out the urgent need to consider a serious discussion about a comprehensive tax reform. Although reforms to the pension system were implemented in 2020 and 2024, they focused mainly on defined contribution schemes for new workers and did not address the fiscal challenges posed by spending associated with the so-called transition generation, whose pension rights are governed by previous laws and represent a growing financial burden.
The rigor of the data presented by the CIEP, contrasting the budgeted increase of 0.05% with the real growth in spending observed as of July 2025 (6.6%), suggests a possible underestimation in the official calculations. This raises questions about the viability of the proposal and the possibility that subsequent adjustments or under-exercises may be required, which could directly impact the economic security of millions of retirees.
Do you think this analysis of the future of pensions is crucial? Share it on your social networks to expand the conversation and explore more content on economics and public policy on our site.
