Banamex Returns to the Annuities Market and Increases Competition in the Pension Sector
Banamex has announced its return to Mexico's annuities market, a scheme in which an insurance provider receives an individual’s retirement funds and, in exchange, pays out monthly benefits for life. The revival of this segment, through Banamex Pensions, comes at a time of growing demand for products that guarantee stable income in old age, and expands the range of options for retirees who choose this modality over programmed withdrawals from their Afore (retirement fund administrator).
This trend is accelerating due to demographic aging. According to estimates by CONAPO, in 2024 there were around 16.5 million people over the age of 60 in the country, and that figure could approach 28 million by 2040. Longer life expectancy and the expansion of the retirement-age population are increasing the need for instruments that protect purchasing power in the long run, particularly in an inflationary environment that, although it has eased from its peaks, is still gradually converging to the Bank of Mexico’s target.
The reentry of Banamex Pensions occurs within the context of Citi's corporate separation process and forms part of its strategy to strengthen long-term business lines. Before its temporary exit, the bank served nearly 13,000 pension clients and can once again participate in the account assignment mechanisms for those entitled to a lifetime pension. By doing so, it joins a market that includes players like Profuturo, Pensiones Banorte, Pensiones BBVA, and Sura—likely increasing competition to offer better terms, service, and pricing.
Current financial conditions also impact the appeal of lifetime annuities. In Mexico, interest rates remain historically high following the Bank of Mexico’s tightening cycle, even as rate cuts seem likely to proceed gradually. This has resulted in relatively attractive real yields on long-term instruments like Udibonos, a key benchmark for calculating very long-term obligations. For future retirees, high rates can increase the initial value of annuity payments; for insurers, they mean a challenge in asset-liability management to maintain solvency if market yields decline over time.
On the regulatory front, the annuities business is subject to the solvency capital framework of the National Insurance and Surety Commission, which requires robust reserves and prudent investment policies, typically focused on long-term government securities and inflation-indexed instruments. Updates to actuarial assumptions and mortality tables, along with metrics like the UMA (the unit of measurement for official purposes), influence payment amounts and aim to protect policyholders from longevity and inflation risk.
For workers who qualify for a pension through the Social Security Law or ISSSTE, the choice between a lifetime annuity and programmed withdrawals is far from trivial: annuities provide certainty of income and transfer longevity risk to the insurer, whereas programmed withdrawals keep the funds in the Afore but expose retirees to market volatility and the risk of depleting their savings. The entry of an additional participant like Banamex may lead to more competitive quotes, greater coverage, and improvements in service, including both digital and in-person advisory support.
Macroeconomic conditions will continue to weigh on this market. Mexico’s economy is showing moderate growth, supported by investment tied to nearshoring and a still dynamic labor market, while inflation is gradualy declining and the central bank proceeds with cautious normalization of rates. The combination of greater competition in the pension segment, a demanding prudential framework, and the evolution of real interest rates will determine how attractive it is for new retirees to lock in a lifetime annuity today versus waiting for lower-yield scenarios.
An additional factor is the interaction with the Well-Being Pension (Pensión para el Bienestar), which raises the minimum income floor for seniors and coexists with contributory pensions. Looking ahead, further formalization of employment and the maturation of the pension reform—which increased employer contributions—could boost pension density and, in turn, the savings available to acquire annuities with better terms.
In summary, Banamex’s return to the annuity business comes at an opportune moment: more competition for a demographically expanding market, real interest rates that still favor annuity purchases, and a regulatory framework that prioritizes solvency. The path of monetary policy, the evolution of inflation, and the ability of insurers to manage long-term risks will be key factors to watch.
