June 15, 2021

The Government plans to increase the contribution of the highest salaries over 30 years in the pension reform


Word for word, the pension reform sent by the coalition government to Brussels has been published this Wednesday. The outlines of the modifications, around nine reform axesThey were already known because the Executive had informed the social agents of them. But the final text sent to the European Commission was known for the first time today and some news can be extracted from it. For example, it defines the time frame in which it intends to increase what the highest salaries contribute progressively, over the next three decades, and the word “expand” is removed (it is left only “to adapt”) with respect to the calculation period. to calculate the retirement pension from 2023.


Escrivá's plan for early retirement: toughen penalties for those who earn the most and retire earlier

Escrivá’s plan for early retirement: toughen penalties for those who earn the most and retire earlier

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This is stated in the document, component 30 of the European Recovery Plan that Spain has sent to Brussels and which is entitled ‘Long-term sustainability of the public pension system within the framework of the Toledo Pact’. “The pension reform is aimed at ensuring the financial sustainability of the system in the short, medium and long term, to maintain purchasing power, preserving its appropriateness and adequacy in protecting against poverty, and ensuring intergenerational equity” includes the document, which emphasizes the willingness of the reform to gain consensus in social dialogue after reaching political agreement on the recommendations of the Toledo Pact.

The Government explains in the Plan sent to the Commission that the various reforms contemplated in this component 30 will not involve costs and investments charged to the Recovery and Resilience Mechanism.

The text sent specifies the calendar of the nine reform axes. The Minister of Social Security, José Luis Escrivá, already announced in March the deployment of the measures in 2021 and 2022, but this document is the one sent to the Commission on April 30, which includes some changes and also details the reforms planned for 2023.

These are the first reforms

immediate changes, which are intended to approve before the end of this year, include the revaluation of pensions to the CPI, the approach of the effective retirement age (currently 64.6 years) at the legal age, and separation of sources of financing of the Social Security, in such a way that the so-called “improper expenses” of the coffers of the organism are transferred to the whole of the State through the Budgets. This last measure has already begun to be applied in the 2021 General Budgets and will continue to be deployed until 2023, when the government expects it to eliminate the Social Security deficit.

The approach of the effective retirement age to the legal one will include several measures to achieve this end. Among them, the Government details Brussels the tightening of the reduction coefficients of the highest pensions because at present the system is “regressive”, points out the Government, and the extension of the incentives to extend the working life beyond the legal retirement age, for which the Minister José Luis Escrivá has proposed to the social agents the possibility of cash a check in fee of up to 12,000 euros.

The Executive also sends the Commission that “it is a precondition to eliminate obstacles of all kinds, including legal, conventional or social, to the voluntary maintenance of older workers in the labor market.” In other words, eliminating forced retirement, an element that employers still resist at the social dialogue table.

Quote delayed by income self-employed

For the year 2022, the Government proposes another major package of reforms in the pension component, although most are expected to have progressive deployments over time.

This is the case of the very gradual increase in what the highest salaries contribute, through the increase in the maximum contribution base, which will be “accompanied by an adaptation of the maximum pension” in order “not to alter the contributory nature of the system.” Ie that pensions have a relationship with what people are trading the system as workers. The Government foresees that these will increase more than the CPI, to solve the increase in inequality in society, also reflected in wages. It is expected to approve the measure “before the end of 2022,” although “the reform will be implemented over the next three decades you.”

The Social Security notified the social agents last week that the new contribution system for the self-employed, so that they contribute according to their income, predictably delayed Regarding the initial forecast of the Government, to launch it in January 2022. The document sent to Brussels proposes “approval in the first half of 2022”, but it is noted that it will have a “gradual deployment from that date “, without specifying the startup of the new system.

For “before the end of 2022” the approval of the new “intergenerational equity mechanism” is also expected to replace the “sustainability factor” of pensions approved by the Government of Rajoy in the unilateral reform of 2013. The factor of For the future, sustainability linked the new initial pensions to life expectancy at all times, with a very complex formula.

This new “equity” mechanism is not detailed. “The introduction of a new instrument is envisaged by virtue of which the fundamental parameters of the system will be subject to periodic review within the framework of the Toledo Pact based on the balance between the employed population and the pensioner population and the level of aggregate expenditure” pick up the text. The objective of the mechanism is “to incorporate indicators that together offer a more reliable image of the challenge posed by the aging of the population for the system, and that free the younger generations from an adjustment caused by reaching the retirement age of most populous worker cohorts “.

Finally, the review and promotion of complementary employment pension systems they will take place “in the first half of 2022, although the reform will have a clear cumulative effect over time.” Some measures, such as increasing incentives at the expense of individual pension plans, have already been reflected in the 2021 Budgets. The Government will also create “publicly promoted employment pension funds, managed by the private sector”, with which Minister Escrivá wants its use to be greatly expanded in Spain.

From 2023

The minister places in 2023 the start of the reform of the calculation period to calculate the retirement pension. Was the point of the pension reform that brought more controversy within the coalition government, because from United can be the option to extend the years of calculation rejected 35 (of 25 of the law), as reflected in working drafts of component 30.

Minister Escrivá, who has always denied his intention to extend this period to 35 years despite the leaked documents, has insisted that this change in the calculation period will not mean a “cut” for pensioners.

What does the component say? “As the third of the measures that make up the block that aims to deepen the reform of 2011, it is proposed to adapt the calculation period for the calculation of the regulatory base of the retirement pension to the current reality of professional careers, considering the possibility of choosing the years to be integrated into the regulatory base in the longest careers, together with a review of the procedure for integrating gaps in the professional career “.

It should be noted that in the previous paragraph the word “expand” has been withdrawn, since in previous drafts it was collected “it is proposed to expand and adapt”. However, the explanation that motivates “the need for the reform” speaks of “the extension of the calculation period for calculating the pension.” Of course, he points out that “the procedure for integrating contribution gaps will be reviewed, in order to address the reality of increasingly atypical and fragmented work careers, especially associated with temporary employment, which is particularly detrimental to young people, as well as as well as women, who experience more interruptions in their work life on average “.

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