Social Security addresses the second reform of the system, after linking pensions to inflation, which must be ready before the end of the year
Among the commitments (milestones, they are technically called) acquired with the European Commission to receive the recovery funds, that of the pension reform is not only one of those that can have the greatest economic impact, but above all social repercussion.
The Government decided at the time to assume before Brussels a reform in two parts. The first, already in force, is related to the revaluation of pensions based on the CPI (Consumer Price Index). Specifically, it will be calculated with the average increase in prices recorded between December of the previous year and November of the current year. It is the measure that the Government insists on applying for the next 2023, with a rate that may not fall below 8%, according to the inflation forecasts of different analysis houses.
That first part of the pension reform also included the Intergenerational Equity Mechanism: an extra contribution of 0.6% of contributions for common contingencies.
But the second part of the reform is yet to come. For negotiating. And to define. It will be the one related to the years that Social Security will take as a reference to calculate the retirement pension and, on the other hand, the maximum contributions of the workers who earn the most each year.
The price races will be the cornerstone of the change that is to come from 2023. And the controversy has already been served since last year. The Ministry of Social Security is working so that this new model is approved before the end of the year. Since last January 1, the system already takes into account the last 25 years of working life to calculate the amount of the pension. Until 2011, Social Security only counted the last 15 years of contributions. But with the reform approved since then, that number of years has been growing to 25.
Revaluation and CPI
What will be the new figure? It is the great unknown. The commitment agreed with Brussels involves “extending” these calculations, as indicated in the document sent to the Commission. Although it does not specify how long or under what conditions. The Minister of Social Security, José Luis Escrivá, already ruled out last year that they were going to take the last 35 years as a reference. This is, in practice, almost the entire working life. Although he will take into account the gap periods (unemployment, for example) so that each worker chooses the period that best suits his circumstances.
The Ministry is also working these weeks on what will be the increase in contribution bases for maximum pensions. Until now, that base on which it is quoted is capped at 4,139 euros per month, with a contribution of 1,171 euros, regardless of whether the salary is much higher. The increase will be “very gradual”, although it is still unknown whether it will be applied progressively over the next 20, 25 or 30 years.
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