A reform of the pension system staggered, in phases, until the end of next year. The next stop: the new formula for the annual increase in pensions based on the CPI and various measures to encourage delayed retirement. The Minister of Inclusion, Social Security and Migrations, José Luis Escrivá, presented this Thursday in the Senate the calendar that the Government manages to approve the changes in the pension system and that he has presented in Brussels, within the Recovery and Resilience Plan . According to this roadmap, the new contribution system for the self-employed according to their real income is expected to be ready by the second quarter of 2022.
This is how the maximum and minimum pension, the minimum vital income and other benefits remain as of January 1
The Minister of Social Security has appeared this morning in the Upper House to explain how the different policies dependent on his Ministry are progressing, such as immigration policy and the minimum vital income (IMV). Although Escrivá had already explained that he intended approve changes to the pension system in two phases, this Thursday has presented to the senators a detailed time axis of the implementation of the different measures, according to the Executive’s forecast that has been sent to the European Commission.
José Luis Escrivá hopes to send Parliament “imminently” the new formula for the annual revaluation of pensions, as reported in the Senate, but this is still being finalized in the negotiations of social dialogue with unions and employers.
The new mechanism, which will replace that of Mariano Rajoy that caused the annual increases of 0.25%, aims to maintain the purchasing power of pensioners for periods of three years, according to social dialogue sources. The objective set by the Government is that pensions never fall, although the average prices do so in a year, but also that this is taken into account in subsequent years, so that the increases are balanced by absorbing the gains of power past purchasing power.
Thus, the Executive foresees that the new revaluation formula will be approved already in the last quarter of the year, as it appears in its calendar. In that same period, before the end of 2021, Minister Escrivá intends that the measures to delay the effective retirement age are also ready. In other words, that the real age at which the population retires is close to the legal retirement age (64.6 years and 66 years, respectively). To achieve this, the minister proposes several initiatives, among which are more incentives for delayed retirement (beyond the legal age) and toughen voluntary early retirement, especially to the highest pensions.
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After that block, the Government’s route hour sets the next stop in the second quarter of 2022. By then, the Government plans to launch the new self-employed contribution system, according to their real income, and the new public pension fund, to promote supplementary pension plans. José Luis Escrivá has affirmed that the negotiations on the contribution of the self-employed are “very advanced” and has assured that the scheme proposed by the Ministry supposes a reduction in the contribution for “70%” of the self-employed.
Finally, the temporary scheme includes a final package of reforms for the fourth quarter of next year, in which reforms on “new listing careers” will be launched, within which Minister Escrivá has mentioned the review “of the period computation “of the pension. This point generated a strong controversy within the Government, due to the initiative to expand the period of calculation at 35 years, which finally the Government did not send to Brussels.
The latest block of reforms, with which the minister hopes to reach the set of recommendations of the Toledo Pact, also includes the new factor of “intergenerational equity” that the Government promised to Brussels and changes in the maximum contribution bases.
The minimum vital income will reach 203,000 households in March
José Luis Escrivá has also presented the latest data on the management of the minimum vital income (IMV), the state minimum income against poverty that was launched by the coalition government. The minister explained that the benefit will reach 203,000 homes this March, in which 565,000 people live, of which more than 43% are minors.
The recognition data of the IMV is still very far from the initial goal of the Executive, which estimated to reach 850,000 homes in 2020. The minister explained that the Ministry has registered a large number of denials of aid, of some 600,000 resolutions, greater than expected. Escrivá explained that Social Security is studying these refusals, which are 60% due to applicants exceeding the income level set to receive the IMV.
The minister has stressed that a large part of these denials motivated by income, far exceed the threshold established by the Government. 40% of these refusals “exceed the income limit by more than double,” Escrivá said.
The Ministry has been tweaking the IMV since its inception with the aim of expanding the beneficiaries to the goal set. Social organizations have highlighted several problems of the minimum income, as some excluding criteria, and their ignorance among some groups in need. Regarding the income thresholds that give access to the benefit that are guaranteed in the aid, the NGOs have highlighted that –although they are higher than in many regional minimum incomes– they are still below the poverty threshold. In other words, the IMV is designed to solve the most acute poverty situations, but even so, households continue to live in a situation of great precariousness.