The Government’s proposal to revalue pensions, reform early retirement and reward delayed retirement with up to 12,000 euros

The first block of the pension reform is in the oven, in the negotiation with the social agents, and the minister responsible for it has revealed this afternoon at what point. The Minister of Social Security, José Luis Escrivá, explained this Monday in Congress his plans to revalue pensions annually based on the CPI, to modify voluntary early retirement (with more penalties in cases of earlier retirement and pensions). higher and lower in most cases) and to increase the ‘premium’ for delaying retirement beyond the legal retirement age. This last measure includes the proposal of a single payment compensation of up to 12,000 euros for each year that retirement is delayed.

Escrivá leaves for 2022 the review of early retirement in long trading careers

Escrivá leaves for 2022 the review of early retirement in long trading careers

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José Luis Escrivá is appearing this afternoon in the parliamentary committee of the Toledo Pact to explain to the political parties how the negotiation in the social dialogue on the pension reform is progressing, which has also committed Brussels. The minister stressed that the measures he has developed are not decisions already taken, but rather government proposals and points under discussion at the dialogue table with employers and unions.

New revaluation index

The minister has once again hoped to close this agreement “shortly” in social dialogue. The intention is that the new formula for the annual revaluation of pensions, which will succeed Mariano Rajoy’s personal income tax of 0.25%, “be something simple and easy to understand, based on the CPI and evaluated every 5 years by the Toledo Pact “.

How is the formula? The current proposal is committed to revaluing pensions according to the CPI of the previous year, but – in the event that there is finally deflation (negative CPI) – that gain in purchasing power is adjusted in the revaluation of the following three years. This adjustment, which would reduce this gain in purchasing power in the following years, would not affect the minimum pensions, the minister said.

New disincentives in early retirement

The reform of voluntary early retirement is more complex and includes several measures.

On the one hand, the government wants further discourage early retirement for future pensioners with higher pensions, What Minister Escrivá has already announced many times. How? Applying the reducing coefficients in the amount of the pension and not in the contribution base, as is currently the case. Thus, José Luis Escrivá intends to equate in practice the reducing percentages that affect pensioners with higher pensions with those that apply to other pensioners and proposes to do so progressively over six years.

The tightening of the early retirement of the highest pensions, which the minister considers that it ends with an “inequitable” and “regressive” system, counts for the moment with the opposition of the social agents, according to sources of the social dialogue. The reason is that workers with higher salaries already suffer a reduction in their pension compared to what they have contributed since the maximum pension is reached, so some voices understand that this group would be penalized doubly.

On the other hand, Escrivá claims modify the reducing coefficients –Which would be monthly and not quarterly as now– to penalize more premature withdrawals. In other words, the Government proposes to increase the penalties for the first two months in which a person can retire early (two years before the legal retirement age and two years less one month before) and, on the contrary, reduce the penalty coefficients thereafter. The objective? Limit early withdrawals to at least a few months, they explain in Social Security, that although it seems very little, in an aggregate way the Government does foresee that it will have important effects.

In addition, the new incentive scheme is also toughened compared to the current ones for the last months in which a worker can retire early, the last three months before reaching the legal age, with the aim that the worker endure until you reach the legal age and do not retire early.

It should be remembered that the scheme of reducing coefficients varies depending on the period contributed by the workers, something that already happens today, so that those who have contributed the most to the system are penalized somewhat less. A practical example: the reducing coefficient proposed for advancing the pension by two years would be 21% in the cases of careers of less than 38 years and 6 months of contributions, 19% when the careers are of more than 38 years and 6 months of contributions, and less than 41 years and 6 months, 17% in the case of careers of more than 41 years and 6 months of contributions and less than 44 years and 6 months, and finally 13% for people with careers of more than 44 years and half listed.

Reward delayed withdrawal more

The minister has also explained his intention to increase the incentives for voluntary delay in retirement beyond the legal age to do so, 66 years in 2021, which is known as delayed retirement. To do this, the Government raises several options eligible for the citizen, which in any case increase incentives:

1) A percentage increase in the amount of the pension of 4% per year of delay, compared to the current model that has incentives between 2 and 4%.

2) Receive a fixed amount at retirement in lieu of the percentage increase in the pension. The proposed amount is up to 12,000 euros per year of delay, in cases of maximum pension and long contribution periods (more than 44 and a half years).

3) A combination of the fixed amount and the monthly increase in the pension, which the minister has not specified in amounts.


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