Unemployed, self-employed and low pensions, benefited from the reform that Escrivá plans

A group of retirees playing cards. / I KNOW

For each year that the period for calculating retirement is extended, its amount is reduced by 0.9%, but it is softened if it can be ruled out

Lucia Palacios

The formula for calculating pensions is going to change. This is almost the only certainty that we have right now, when the government has just started negotiating with the unions for the second phase of the reform of the Social Security system, which has to be agreed upon before the end of the year. This is the commitment that the Executive acquired with Brussels in the recovery plan.

And, like any change, it usually brings benefits and losers. Unemployed, self-employed, shorter contribution careers and workers with lower wages will be the groups that, foreseeably, will be favored by the reform, despite the many questions that exist since almost everything is still to be designed and -what is even more difficult – to agree with the social agents and the parliamentary arch.

To date, what is known is that, despite the fact that the European Commission is pressing to extend the calculation period to the last 35 years, the Minister of Social Security, José Luis Escrivá, has already put this idea on hold in the face of widespread rejection that it causes, as he reiterated last Monday. "No way," he promised before the microphones.

It will not reach 35 years, but its objective – it always has been – will be to extend the calculation period. But, to do so without raising too much dust, it intends to introduce two elements that will greatly soften the new formula: the possibility of choosing the best years and ruling out contribution gaps (those periods of time in which the worker has not contributed and that, therefore penalizes your final pension).

For each year that the period between 25 and 35 years is extended to calculate the pension, its amount is reduced by an average of 0.9%, according to the estimate made by the Bank of Spain in a recent report. In other words, if it were decided to extend it to 30 years, the initial pension would fall by around 4.5%.

It also means that this unofficial proposal that circulated through the offices of La Moncloa to estimate the pension with the last 35 years of contributions, would have caused a snip in the pension of the new retirees of 8.2%, which would also be added to the cut of the 5% that the 2011 reform has meant, which progressively extended from 15 years that were counted before to the current 25.

neutral effect

The formula used by Escrivá to extend the calculation period but allowing some years to be discarded – a solution recommended by the Toledo Pact in its recommendation 5 – would improve the retirement of the unemployed (especially those who in their last years of career and due to some of the latest economic crises were left without work and were unable to rejoin the labor market), the self-employed (since the contribution gaps for this group are counted as 0), workers with short careers and those with lower wages. This is extracted both from the aforementioned Bank of Spain study and from a previous one prepared by the Research Group on Pensions and Social Protection, made up of researchers from the University of Extremadura and Valencia.

The estimate made by the Bank of Spain shows that if the period is raised to 35 years and the best 29 are chosen, the effect on the system is neutral, so that the average amount does not vary. However, while those with a high pension would slightly reduce their amount (-1.7%) and it would cost them more to reach the maximum benefit, it would increase in the case of those who have been unemployed for more than a year (2 .5%) or with a part-time job (0.6%) or have gaps of more than one year (2.8%). In turn, low pensions would benefit, with a rise of more than 2% for those below the median.

The final impact of the reform will also depend on how the contribution gaps are integrated; that is, how the bases of those periods in which contributions have not been made are filled in, since Escrivá has already advanced that he intends to give them “better treatment”. Currently, when calculating the pension, these gaps are already compensated for employees (not for the self-employed), filling the first 48 monthly payments with 100% of the minimum base and the rest, by 50%. An option that could be put on the table would be to improve that 50% bonus.

Spain is one of the few exceptions in Europe that does not calculate the pension of new retirees with all the years of contributions. Moreover, within the great powers, it is the country that has a more favorable formula when taking into account the last 25 years, only behind France, which computes retirement with the 25 best years.

Thus, most European partners, such as Germany, the United Kingdom, Belgium, Ireland, Italy, Portugal..., use the entire working career to determine the pension. This is the formula preferred by the European Commission, since in terms of financial sustainability, this leads to a reduction in system spending. For this reason, Brussels has urged Spain to extend the calculation period.

to 35, and catch all. That is what makes the most sense from a contributory point of view. You do not choose anything, but you choose. Actually, it should be your entire career. In many countries they use the entire race.

"Actually, what makes sense from the contributory point of view is to use your entire career," defends Enrique Devesa, a professor at the University of Valencia, who emphasizes that the Spanish pension system is contributory, so it cannot be used to 'correct how bad the labor market is'.

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