AIReF will analyze the system’s income every 3 years from 2025 to control pension spending in case more measures are needed
MADRID, 13 Mar. (EUROPA PRESS) –
The Government will evaluate every five years within the framework of social dialogue the increase in the maximum contribution bases contemplated in the second leg of the pension reform and will send a report on the subject to the parliamentary Commission of the Pact of Toledo, as stated in the draft of the second phase of the pension reform, to which Europa Press has had access.
The reform, which will continue to be negotiated this Monday with the social agents from this draft, establishes several measures to increase the income of the system, including the uncapping of the maximum bases, which will rise between 2024 and 2050 the annual CPI plus a fixed amount of 1.2 percentage points.
In parallel to the increase in the maximum bases, the maximum pension will also rise, although not at the same rate. What was known until now is that the Government had proposed that the maximum pension be revalued each year of the period 2025-2050 with the annual CPI plus an additional increase of 0.115 cumulative percentage points each year until 2050.
From 2050 to 2065, additional increases had been planned, although last Friday, when the Executive presented its measures to the social agents, such increases were not specified.
However, the Government does detail in the draft how much it wants the maximum pension to rise between 2051 and 2065 to match it to the top of the maximum bases. Specifically, it intends that, in said period, the maximum pension rises by the annual CPI plus an additional increase that will go from 3.2% to 20%, depending on the year.
Thus, the text details that this additional increase to the CPI that the maximum pensions caused from 2051 to 2065 will experience will be 3.2% in 2051; 3.6% in 2052; 4.1% in 2053; 4.8% in 2054; 5.5% in 2055; 6.4% in 2056; 7.4% in 2057; 8.5% in 2058; 9.8% in 2059; 11.2% in 2060; 12.7% in 2061; 14.3% in 2062; 16.1% in 2063; 18% in 2064, and 20% in 2065.
At the end of that period, in 2065, the text establishes that the convenience of maintaining the convergence process with the uncapping of the maximum contribution bases will be assessed within the framework of social dialogue until a total increase of 30% is reached.
What is pursued in this way is that the bulk of the increase in the maximum pension is concentrated from 2050, which is when Social Security calculates that the financial tensions due to the retirements of the ‘baby boomers’ will end. Hence, the maximum contribution bases and the maximum pension are not going to rise at the same rate in the coming years.
Also with the purpose of raising the system’s income to face the higher spending that the retirements of the ‘baby boomers’ will imply, the Executive proposes doubling the overprice associated with the Intergenerational Equity Mechanism (MEI).
This, which is currently 0.6%, will rise to 1.2% in 2029, at a rate of one tenth per year, with the company taking over 1% and the worker taking over 0.2%. The draft establishes that from the year 2030 to 2050 this same percentage of 1.2% will be maintained, with equal distribution between employer and worker.
This overquoting is of a finalist nature and its objective is to fatten the Social Security Reserve Fund, known as the ‘pension piggy bank’. The Government specifies in the draft that this surcharge may not be subject to any bonus, reduction, exemption or deduction, nor is it subject to reduction by the application of corrective coefficients.
The disposal of the assets of the Reserve Fund can only be used, exclusively, to finance contributory pensions. The Executive specifies in the draft that, from 2033, the General State Budget Law will establish for each year the annual disbursement to be made by the ‘piggy bank’ in terms of percentage of GDP.
But there will be a maximum limit for each exercise of the period 2033-2053 that the Executive details in the draft. Specifically, the maximum annual disbursement of the Reserve Fund is established at 0.08% of GDP for 2033; at 0.10% by 2034; at 0.12% by 2035; at 0.14% by 2036; at 0.17% by 2037; at 0.20% by 2038; at 0.23% by 2039; at 0.26% by 2040; at 0.29% by 2041; at 0.32% by 2042; at 0.35% by 2043; at 0.38% by 2044; at 0.41% by 2045; at 0.43% for 2046; at 0.46% for 2047; at 0.53% for 2048; at 0.60% for 2049; at 0.87% by 2050; at 0.37% by 2051; at 0.22% for 2052, and at 0.09% for 2053.
Also with the aim of improving the income of the system, the Government’s proposal proposes the creation of a “solidarity quota” on the part of the salary that is currently not listed due to exceeding the maximum contribution limit, which will be 1% in 2025 and it will increase at a rate of 0.25 points per year until reaching 6% in 2045 (5% paid by the company and 1% paid by the worker).
Other novelties that the draft raises are the creation of an observatory to improve the benefit for cessation of activity of the self-employed and the commitment of the Government to send a proposal to reform partial retirement to the Pact of Toledo in six months.
AIReF WILL MAKE SURE THE EXPENDITURE ON PENSIONS DOESN’T EXPAND
The draft establishes that the Independent Authority for Fiscal Responsibility (AIReF) will publish and send to the Government, from March 2025 and on a triennial basis, an evaluation report with projections of the estimated impact of the measures adopted as of 2020 to strengthen revenues of the system in the period 2022-2050.
AIReF will have to calculate the average annual impact of these measures as a percentage of GDP for this period, using the same macroeconomic and demographic assumptions of the latest Aging Report published by the European Commission.
If the average annual impact of the income measures is equal to 1.7% of GDP, the average gross public spending on pensions in the period 2022-2050 of the latest Aging Report may not exceed 15% of GDP. If it exceeds that 1.7% of GDP, pension spending may not exceed 15% of GDP plus the difference between the estimated average annual impact of the measures and 1.7%. And if the average annual impact of the revenue measures is less than 1.7% of GDP, spending may not exceed 15% of GDP minus the difference between the estimated average annual impact of the measures and 1.7%.
In the event of any excess in any of these three situations, the Government will request AIReF within a month to report on the impact of the measures and will propose possible measures to eliminate excess spending. In addition, it will negotiate with the social agents to send a proposal to the Toledo Pact to correct this excess spending on pensions through an increase in contributions or another alternative formula to increase income or a reduction in pension spending as a percentage of GDP or a combination of both measures.
As a result of these negotiations, the Government will send a bill to Parliament containing the appropriate measures to eliminate excess net pension spending by September 30, which will enter into force on January 1 of the following year.
In the event that the law with the corrective measures for the excess of net pension spending does not enter into force on January 1 of the following year, the MEI price will increase to offset two tenths of the excess estimated by AIReF as of January 1. January of the following year and another two tenths in each of the following years until new measures with the same impact are adopted or the excess spending is corrected.
