The Bank of Spain estimates that if it is only raised to 35 years, the cut for new retirees would exceed 8%, which would be added to the 5% drop due to the increase to the last 25 years
Extending the pension calculation period from 25 to 35 years of contributions would mean a cut in the benefit of new retirees of 8.2%, but its amount would not change if the worst six years are allowed to be ruled out, according to the Bank of Spain in a report published this Thursday, precisely when the negotiation of the second phase of the reform of the system has just begun, in which an increase in the calculation period must be agreed before the end of 2022, as promised with Brussels.
As a general rule, this measure entails a decrease in the payroll of the elderly. "The average initial pension is a monotonically decreasing function of the number of years considered for the calculation of the regulatory base," emphasizes the supervisor in said report. In fact, the 2011 reform, which involved an increase from 15 to 25 years, has already caused a 5% drop in pensions, which would be added to that 8.2% in the event that, as urged by the European Commission, will rise to 35, according to the estimate made by the public body.
However, workers who are already thinking about retirement breathe easy after the Minister of Social Security, José Luis Escrivá, reversed his initial determination and promised last Monday that the Government will not extend the retirement period to 35 years. calculation period. "In no case will it be an attempt to extend the calculation period to 35 years," he specified, although he did admit that "it may make sense to extend the calculation period, but at the same time choose the best ones, and in turn rule out gaps." It will be a reform of "small adjustments to improve the fairness of the system", in his own words.
But it is not trivial what those "small adjustments" are made, since depending on how it is adjusted, the pension will grow or, on the contrary, it will decrease. Or you can even stay as is. This is the objective that the Executive has: that the reform be "neutral" at the budgetary level -as Escrivá reiterates- but that it offer a "new fairer formula" for new careers, since for one in three employed the best years of contribution are no longer the last, as was the case previously.
Thus, the idea that now surrounds the minister is to extend the calculation period but, at the same time, include other elements in the final formula, such as excluding a certain number of years -still to be defined- and improve the coverage system for gaps in contribution (periods in which there is no contribution due to not being employed). This formula of "simultaneously extending the calculation period to 35 years with the discarding of the most unfavorable years would make it possible to soften the fall in the average initial pension, while reducing the heterogeneity of pensions between individuals", explains the Bank of Spain .
The report simulates the impact of taking into account the 29 most favorable years within the 35 years prior to retirement. The result is that the average pension would be practically similar to the current one, since it would only experience a drop of 0.1%. However, this formula would benefit the lowest pensions (Ulas that are below the median), while it would cause a cut in the highest ones.
“Extending the calculation period would have a heterogeneous impact among pensioners. In particular, the effect would be less for pensions below the median, which would result in less inequality, "highlights the agency.