Green light from Congress to the pension reform, which links them to the CPI and raises employment taxes




Today, the Plenary of Congress has given the green light to the first leg of the pension reform, one of the main rules that condition the arrival of European funds and that sees the light without the consensus of employers and amid harsh criticism from the opposition. The law has reached the Plenary after overcoming the express procedure imposed by the Government two weeks ago – and which raised the discomfort of many parliamentary groups – by adding to the votes of PSOE and United We Can, those of Esquerra Republicana, the PNV and abstention by EH Bildu.

The norm repeals the pillars of the reform launched by the PP in 2013 and recovers the link between payroll and the CPI and repeals the sustainability factor, although this has not come into force.

As an alternative, the ministry led by José Luis Escrivá has imposed the so-called intergenerational equity mechanism, which is associated with orn increase of 0.6 points in contributions over ten years -from 2023 and until 2032- to fill the so-called ‘pension piggy bank’ and have a mattress with which to face the greater expense that is expected with the arrival of the ‘baby boomers’ into retirement. The technical incorporation of this mechanism into the law has raised blisters in the opposition, as the Government has chosen to introduce it in an amendment agreed by the PSOE and United We Can with ERC and Bildu.

After the approval of this norm, the Executive will begin the negotiation of the second part of the reform, the toughest, which will have to address issues as thorny as the changes in the calculation of the years to determine the pension, the removal of the bases of the contribution of the highest salaries and the reform of company pension plans, the preliminary draft of which has already been approved by the Council of Ministers. The improvement of minimum pensions will also be discussed. Below are the main measures of the reform that is approved today:

Guaranteed purchasing power

The revaluation with the CPI of the previous year is guaranteed for the retirees after repealing the revaluation index of the 2013 reform that forced to revalue the payroll by 0.25% if the accounts were not balanced.

Penalties for early withdrawal

Retiring early will have a cost for the worker. The design of the reduction coefficients is toughened for those who retire 24 or 23 months before the legal limit and will reach 21% (the reduction of the pension is now 16%) and from there the punishment decreases in some cases. For example, whoever leaves the labor market 22 months before their legal retirement age will see their pension decrease by 14.67% and not by 16%. The pattern is repeated among those who have contributed for a longer time, although with fewer penalties. Thus, those who have contributed between 38.6 and 41.6 years would be subject to a reduction coefficient of 19% in month 24 and 16.5% in month 23, compared to the current 15% in the corresponding quarter.

The change in penalties, going from a monthly to a quarterly calculation, will also apply to that of forced early retirement. In this, the worker can retire up to four years before the legal age and must have been dismissed in an ERE, objectively or due to the bankruptcy of the company. A system is established for these cases that will reduce the pension by 30% in the case of a four-year advance with less than 38 years and six months of contributions, and 0.5%, for those who anticipate it one month with 44 and six months or more in contributions.

Prizes of up to 12,000 euros

There will be new monetary incentives for those who continue working beyond the legal retirement age. They will receive a one-time premium of up to almost 11,000 euros (in the case of 37,567 euros of pension) for each year of delay. In the event that the worker has contributed for at least 44.5 years or more, this incentive would reach 12,060 euros for each year of deferral. Thus, for example, in a pension of 9,569 euros (683 euros per month) this single payment would be 4,786 euros and 5,264 with more than 44.5 years of contributions. While in an average pension of 20,000 euros per year, this single premium would be 7,482 and 8,230 euros, respectively, depending on the years of contributions. The rule will give the worker the option of choosing this formula or also opting for a 4% increase in the regulatory base of his pension for each of these years that delays his retirement (currently this incentive is between 2% and 4%). %). They may mix the two possibilities, one part in a single payment and the other as an increase in the life pension.

Reinforcement of Social Security income

The reform establishes by law the reinforcement of Social Security income through the General State Budgets. Annual transfers are established to finance benefits and exemptions in contributions, supplements and benefits of a social nature, identified as expenses improperly assumed in the system. In addition, as a result of a requirement from ERC and Bildu, the Government is obliged to commission an audit within a month to quantify, based on all its income from contributions, what invoice it has been assuming other than spending on contributory pensions, between 1967 and 2019.

Widow’s pension

It has also included the expansion of access to the widowhood pension by common-law couples, an achievement of Más País-Equo, and the recognition of a supplement to the pension for contribution careers of 40 years that do not reach 900 euros.

Forced retirement of workers under 68 years of age is prohibited

The rule prohibits forced retirement clauses from being established in company collective agreements for workers under 68 years of age, although it introduces some exceptions aimed at improving the presence of women in certain sectors, as well as the quality of their workers. Specifically, forced retirement before the age of 68 will be legal only for those sectors in which women represent less than 15% of employed persons and provided that, in addition, two conditions are met. The first, that sick leave must simultaneously entail the permanent and full-time hiring of at least one woman and, the second, that the retired person has the right to collect 100% of the ordinary retirement pension.

In addition, the agreement leaves an escape route to the forced retirement clauses in force right now and that have proliferated in many collective agreements in the last two years and states that they may continue to be applied up to three years after what is agreed in their agreements. This clause introduces the exception to the rule since, in Spain, retirement is always voluntary. When the legal retirement age is reached, currently between 65 and 66 years old, the company cannot force an employee to resign without first paying compensation or without having a legal justification to protect him. That is why this clause has been entering and leaving the legislation in recent years, repealing it by popular governments and rescuing it by socialists.

Minimum pensions linked to the minimum wage

Another of the pending issues of the reform, and one of the demands of the Government partners, is the improvement of the minimum pensions, a task that the reform itself recognizes as pending task by including the mandate to the Government to undertake a review of the criteria to determine their amounts in order to guarantee their sufficiency. According to the amendment approved by Congress in the reform, the Government will promote, within a maximum period of one year, the regulatory modifications necessary to establish rules regarding the evolution of these pensions, taking into account the evolution of the minimum interprofessional salary, guaranteeing the financial sustainability of the public pension system.

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