January 20, 2021

To clean up the pension system would mean raising personal income tax by 23% or salaries by 17%

To clean up the pension system would mean raising personal income tax by 23% or salaries by 17%


MadridUpdated:

The biggest danger of the current pension system is not to reform it, since the pension hole continues to grow every year. It is one of the conclusions of the report of Fedea, «The Spanish public pension system: myths and realities», presented this morning by Professor Miguel Ángel García, adviser to the Government in the 2013 reform. The document estimates that the current deficit of the 19,000 million euros would be equivalent to raising the IRPF 23% taxpayers or create overnight 3,6 million members, that wages or the contribution base rise by 17.1% or raise the rate paid by companies and workers a 4 , 8%.

Because currently, on average, a retiree has not quoted the number of years enough to receive a pension during his retirement, since Spain is the country with the highest life expectancy in the world having risen six years from 1975 to 83 years and retirement lasts on average about 21 years.

If the current replacement rate of 78% – the percentage of the first pension in relation to the last salary, which is one of the highest in the world – is maintained, the contributions paid and revalued with the average GDP growth of the last 25 years ( 2% per year) result in have paid 16.1 years, that is, five years without contributing. In the case of a worker who has contributed 37 years and is entitled to 100% of the pension, the fees cover 13.2 years of pension.

The other option is grow by 3.3% on average every year for the next few decades. Otherwise, if current growth rates are maintained, the growing spending on pensions would climb from 12% of current GDP to 16.9% in 2050. All this with an outlay of more than 153,000 million in 2019 and with the latest reform of the pensions of 2013 -which introduced the factor and the sustainability index, which revalued pensions by 0.25% if the system was in the red and reduced since 2019 the initial pension to ensure that more pensions were charged.

«The heritage of Amancio Ortega, the third largest fortune in the world, is 85,000 million. If we expropriate everything, we only have to pay pensions until July, "Garcia has illustrated graphically to show the magnitude of the problem and point out that the problem is not fixed by" raising taxes on the rich ".

«It is often said that young people will not have a pension. They really will, because the baby boom generation will no longer be there when they retire. The problem is the generations that are in between», He pointed. As an indicator, all those who work until 2048 will be affected by this growing bill that will skyrocket in a few years when those born between 1958 and 1977 begin to retire.

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