The federal government spends more on pensions than on shares

The federal government has spent more on pensions than on state contributions since 2020, due to an aging and longer-living population, as well as stagnant federal revenue sharing.

Between January and May 2025, Claudia Sheinbaum's administration spent 626.332 billion pesos on pension and retirement payments, which in fact represents 17% of the total net public sector spending.

Meanwhile, for state and municipal contributions, the government allocated 624.039 billion pesos in the first five months of 2025, according to data from the Ministry of Finance and Public Credit (SHCP).

Jorge Cano, coordinator of the public spending program for the organization México Evalúa, explained that this trend in public finances observed in recent years is explained by three reasons.

"The first is that the demographic trend is driving an increase in contributory pensions, i.e., those from the Mexican Social Security Institute (IMSS), ISSSTE, CFE, and Luz y Fuerza (Electric Power), and this will continue due to the aging of the population and increased life expectancy," said the specialist.

Likewise, Cano emphasized, the increase in spending on non-contributory pensions (such as the Universal Pension for Older Adults) also has a lot to do with it, "which was a decision made during the previous six-year term and has remained a state policy during the current six-year term.

It's worth noting that the pension expenditures released by the Treasury do not include non-contributory pensions, i.e., those in which the beneficiary contributes nothing from their salary to fund them.

Finally, he emphasized that in the case of participations, these have seen slower growth because federal shareable revenue (the amount to be distributed between the Federation and the states) has stagnated due to a drop in the country's oil revenues.

"We have rapidly growing pension spending, primarily due to population dynamics and federal government decisions, and pension contributions remain almost stagnant due to a deteriorating oil production platform and revenues," he summarized.

Until 2020, the government allocated more resources to state contributions than to Mexican retiree pensions. There were years, like 2001, when the state spent 157% more on contributions than on pensions.

Federal contributions to federal entities, known as Branch 28, are the resources that the Federation transfers to states and municipalities for their own use.

These resources come from federal revenues, which include federal taxes, mining rights, and a portion of oil revenues.

Reduction in retirement age will increase liabilities

Last week, President Claudia Sheinbaum published a decree in the Official Gazette of the Federation (DOF) to reduce the minimum retirement age for ISSSTE workers by three years.

Jorge Cano stated that with the lowering of the retirement age, the federal government's pension liabilities will increase, meaning it will spend even more on pensions in the coming years.

"Due to the increase in life expectancy and the early retirement of public employees, the government will have to fund each retiree for longer, and this will ultimately increase pension payments," he added.

He also emphasized that, based on Mexico's demographic projections, everything indicates that government spending on pensions will maintain steady growth until 2050.

"That is to say, we still have several years of constant pressure on public finances from pension spending," he concluded.