The increase in the maximum bases will be evaluated every 5 years and the overpayment of the MEI will remain at 1.2% from 2030 to 2050, according to the government draft
MADRID, 13 Mar. (EUROPA PRESS) –
Government and social agents will meet again this Monday, at 4:30 p.m., to discuss the pending issues of the second phase of the pension reform after the proposal presented to them last Friday by the Ministry of Inclusion, Social Security and Migrations, with the endorsement of the European Commission and Unidas Podemos.
The unions already advanced, after the meeting on Friday, that their general assessment of the Government’s proposal was positive, although they expected more ambition in other aspects. On the contrary, CEOE, Cepyme and ATA expressed their “frontal” opposition to the reform proposed by the Executive. For the businessmen, the reform has a “collection voracity” and a “populist” character, which “will undermine the efforts of the companies in wage negotiations” with the unions.
The Ministry of Inclusion, Social Security and Migrations proposed on Friday changes in the calculation period of the pension so that it is calculated either with the last 25 years of contributions or with 29 years of contributions, from which the two worst may be excluded, therefore, in practice, the calculation in this second case will be 27 years.
In this way, it will be possible to choose between what already exists (last 25 years of contributions) or use a computation period of 29 years, eliminating the two worst years of contributions. In other words, the calculation period will remain at 25 years if it is not more beneficial to take a total of 27 years (29 years minus the two worst).
This dual regime of the computation period will be in force for the next 20 years. The new option that is introduced (29 years excluding two) will be deployed progressively for 12 years from 2026, which will especially benefit workers with irregular careers, as explained to Europa Press by Social Security sources.
Thus, through this new system, the pensioner will be offered both possibilities with the idea of applying what is most advantageous for the worker who retires.
With the aim of improving the income of the system, the Government’s proposal proposes a “solidarity quota” for the part of the salary that is currently not listed due to exceeding the maximum contribution limit. This will be 1% in 2025 and will increase at a rate of 0.25 points per year until reaching 6% in 2045 (5% by the company and 1% by the worker). The fee will only be applied to salaries higher than the maximum contribution base established at any time.
Also with the purpose of raising the system’s income to face the higher spending that the retirements of the ‘baby boomers’ will imply, the Executive proposes doubling the overprice associated with the Intergenerational Equity Mechanism (MEI). This, which is currently 0.6%, will rise to 1.2% in 2029, at a rate of one tenth per year, with the company taking over 1% and the worker taking over 0.2%.
According to the draft presented to the social agents, to which Europa Press has had access, this overpriced MEI will remain at 1.2% from 2030 to 2050 with equal distribution between employer and worker.
Another of the legs to increase the income of the system consists of the uncapping of the maximum contribution bases, which will rise between 2024 and 2050 the annual CPI plus a fixed amount of 1.2 percentage points.
According to the draft accessed by Europa Press, the Government will evaluate every five years within the framework of social dialogue the increase in the maximum contribution bases and will send a report on the subject to the parliamentary Commission of the Toledo Pact.
In parallel to the increase in the maximum bases, the maximum pension will also rise, although not at the same rate. What was known until now is that the Government had proposed that the maximum pension be revalued each year of the period 2025-2050 with the annual CPI plus an additional increase of 0.115 cumulative percentage points each year until 2050.
From 2050 to 2065, additional increases had been planned, although last Friday, when the Executive presented its measures to the social agents, such increases were not specified.
However, the Government does detail these additional increases for the period 2051-2065 in the draft. Thus, the text specifies that this additional increase to the CPI that the maximum pensions caused from 2051 to 2065 will experience will be 3.2% in 2051; 3.6% in 2052; 4.1% in 2053; 4.8% in 2054; 5.5% in 2055; 6.4% in 2056; 7.4% in 2057; 8.5% in 2058; 9.8% in 2059; 11.2% in 2060; 12.7% in 2061; 14.3% in 2062; 16.1% in 2063; 18% in 2064, and 20% in 2065.
At the end of that period, in 2065, within the framework of social dialogue, the convenience of maintaining the convergence process with the uncapping of the maximum contribution bases until reaching a total increase of 30% will be assessed.
What is pursued in this way is that the bulk of the increase in the maximum pension is concentrated from 2050, which is when Social Security calculates that the financial tensions due to the retirements of the ‘baby boomers’ will end.
AIReF WILL ENSURE THE CONTAINMENT OF PENSION EXPENDITURE
The draft establishes that the Independent Authority for Fiscal Responsibility (AIReF) will publish and send to the Government, from March 2025 and on a triennial basis, an evaluation report with projections of the estimated impact of the measures adopted as of 2020 to strengthen revenues of the system in the period 2022-2050.
AIReF will have to calculate the average annual impact of these measures as a percentage of GDP for this period, using the same macroeconomic and demographic assumptions of the latest Aging Report published by the European Commission.
If the average annual impact of the income measures is equal to 1.7% of GDP, the average gross public spending on pensions in the period 2022-2050 of the latest Aging Report may not exceed 15% of GDP. If it exceeds that 1.7% of GDP, pension spending may not exceed 15% of GDP plus the difference between the estimated average annual impact of the measures and 1.7%. And if the average annual impact of the revenue measures is less than 1.7% of GDP, spending may not exceed 15% of GDP minus the difference between the estimated average annual impact of the measures and 1.7%.
In the event of any excess in any of these three situations, the Government will request AIReF within a month to report on the impact of the measures and will propose possible measures to eliminate excess spending. In addition, it will negotiate with the social agents to send a proposal to the Toledo Pact to correct this excess spending on pensions through an increase in contributions or another alternative formula to increase income or a reduction in pension spending as a percentage of GDP or a combination of both measures.
As a result of these negotiations, the Government will send a bill to Parliament containing the appropriate measures to eliminate excess net pension spending by September 30, which will enter into force on January 1 of the following year.
In the event that the law with the corrective measures for the excess of net pension spending does not enter into force on January 1 of the following year, the MEI price will increase to offset two tenths of the excess estimated by AIReF as of January 1. January of the following year and another two tenths in each of the following years until new measures with the same impact are adopted or the excess spending is corrected.
