This Monday the Ministry of Inclusion and Social Security finally reached an agreement in principle with the social agents on the first pension reform package. It includes the repeal of the sustainability factor – which will be replaced in 2027 by an “intergenerational equity mechanism” to be determined -, the revaluation with the CPI, penalties for early retirement and incentives to delay the retirement age. Although the agreement must always be well received, once again it does not solve the fundamental thing, the unsustainability of the public pension system. Put off the toughest issues. Likewise, it determines that a part of the pensions be financed via taxes, that is, outside the system.
No one doubts that pensions are a huge social achievement that must be preserved. As the system has proven insufficient, the solution had to be found outside of it. If the piggy bank does not give, it is supported by taxes. With that logic, many workers will begin to make numbers and will see that this exit does not seem sustainable. More tax pressure during your working life and less sustainability the older the population ages. There is talk of taking out improper expenses – which is decided by the Government – something that makes sense because they should not be a burden for Social Security. However, the amount that will be financed with taxes is greater than those improper expenses, so it is a way to get out of the current system, with lags that raise the tax burden and generate the wrong incentive. Whenever resources are lacking, they will be paid out of taxes and, thus, incidentally, it is not necessary to touch the system, which is where most of the problems lie.
Several inescapable topics are not covered. The first thing, the need for information: each citizen should be aware of what his pension would be, depending on what he contributes at each moment and for how long. And go further and allow citizens to increase these contributions and receive each euro contributed (the famous notional accounts system), with the possibility of private plans without penalties. Another unavoidable issue is that of retirement age. Delaying it is mandatory and even more combining pensions with part-time jobs, something that now seems taboo and is common in other countries.
Pedagogy seems obliged to understand what this system of benefits consists of. Many citizens believe that they simply receive what they have contributed. It is not like this. What is contributed for pensions during working life is between 40% and 60% of what is charged upon retirement. They are actually sustained by the generations who work for those who cease to do so when they reach an age. The demographic evolution throws a devastating reality. Nobody wants to look like the bad guy or tell the truth. Politically it is complex, nine million pensioners are many votes and, given the aging of the population, there will be more and more. However, young people and society as a whole require well-explained measures that are also more ambitious and realistic to guarantee this achievement of the welfare state.