Social Security accumulates a contributory deficit at historic levels. The imbalance in income paid exclusively by contributory pensions is close to 30,000 million euros in the last 12 months, equivalent to 1.91% of GDP, according to the Pension Observatory of the consulting firm WTW. The pension system accumulates 48 quarters receiving less than what it dedicates to contributory benefits, the equivalent of 12 years with a permanent deficit that indicates a deterioration in the financial health of the pension fund despite the improvements in collection and aid. that it receives from the State.
This imbalance occurs despite the constant increase in the effort of workers and companies through social contributions. However, the growth in spending is being greater than that in collection, even after years of improved employment and fee increases, and the good performance of income from social contributions is being insufficient.
He Spending on contributory pensions constitutes a vast majority (87.1%) of total spending and grows at a rate of 1.9% year-on-year. How is the growth distributed? The effect of the new pensions adds 0.3 points and the substitution effect of the higher payments that come in adds another 0.6 points. The increase in the cost of temporary sick leave (+18% in a single year) limits the possibilities of reducing the contributory deficit, they explain in the report.
Total spending on contributory pensions for this year is expected to close with an increase of close to 7%, lower than the 10.3% growth recorded in 2023 due to the effect of the largest revaluation with the CPI in history. In any case, social contributions increase at a significantly lower rate.
The Experts express their doubts and believe that it will be necessary to activate more levers to shore up the sustainability of the system. They also aim to rationalize efforts through spending. “The sustainability of the Social Security system will depend on a combination of factors, such as the consolidation of reforms, adjustments in contribution policies and measures to control the growth of expenses,” says Rafael Villanueva, associate director of the Retirement area of WTW. Spain.
The field work of the Pensions and Social Protection Research Group puts the magnifying glass on the balance of income and expenses of Social Security. The figure managed by the Administration is the balance of non-financial operations: it marks a deficit of 0.59% of GDP, about 9.2 billion, which is conditioned by the aid received by the State Social Security in the form of transfers at zero cost. The injection is budgeted to be close to 30,000 million this year; and 46,000 million adding other types of transfers, in part to address improper expenses as recommended by the Toledo Pact.
Enrique Devesa, professor at the University of Valencia, researcher of the group and member of the WTW Pensions Observatory who has collaborated in the preparation of the report, points out that “this year marks a key moment in the implementation of various reforms that seek to reduce the structural deficit of the system”. However, “the balance of the effects of these measures will only be fully visible in the medium and long term,” he adds.
Years of fee increases
The last pension reform created several new quotas. The first, an additional quote, called Intergenerational Equity Mechanism (MEI)which started with an initial rate of 0.6%, from 2025 it will be taxed at 0.8% and will reach 1.2% of the payroll in 2029 despite not generating a greater right to collect benefits. This overpayment is allocated in an accounting manner to the Reserve Fund, known as the pension piggy bank that will be used from the next decade to pay a part of the baby boom pensions.
In addition, as a novelty for 2025, a new extra fee begins that more than one million workers who earn more than 58,900 euros gross per year must pay: the solidarity fee. This extraordinary contribution incorporates an additional rate on the salary bracket that exceeds the maximum contribution base and includes three brackets:
- An additional 0.92% contribution for the part of the salary between the maximum base and 10% higher than that maximum base. In 2025, this first tranche will reach just under 65,000 euros.
- 1% for the salary range from the additional 10% of the maximum base to 50%. In 2025, this second tranche will be between almost 65,000 euros and 88,000 euros.
- 1.17% for the remuneration bracket above the additional 50% of the maximum base. In 2025, salaries starting at 88,000 euros will be in this section.
The contribution bases also increase at a faster rate than inflation: the maximum will rise by 4% due to the so-called ‘destope’, while the minimum will probably do so at a rate greater than the price variation due to the SMI.
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