The Ministry of Social Security is already working with the expectation that the planned net expenditure of the pension system will exceed the barrier of 13.3% of GDP set by the last reform of the public protection system. Given this horizon, the department headed by Elma Saiz plans to open negotiations with employers and unions next year to apply an extra increase in social contributions related to the Intergenerational Equity Mechanism (MEI).
It is already discounted that these contributions, intended to nourish the Reserve Fund (better known as the pension piggy bank), will grow by one tenth, up to 0.8% of the gross salary in 2025, and will reach 1.2% in 2029. However, the projected increases may not be sufficient in the long term. Hence, Social Security works with the option to apply greater pressure on workers and companies if the Independent Authority for Fiscal Responsibility (AIReF) believes that there is excess spending.
To do this, it will convene social agents again in 2025 to decide whether to cut spending or strengthen income. If there was no pact, The pension reform provides that the increase in contributions will be applied automatically on January 1, 2026. This process constitutes the security system with which the then Minister José Luis Escrivá convinced the European Commission that his reform guaranteed the sustainability of the pension system and that his successor will be able to apply.
AIReF will carry out this first evaluation taking the projections of pension expenses and income prepared by the Ministry of Economy for the Aging Report of the European Commission and, in addition, with data provided by Social Security.
The employers, unions and interested actors have until next December 30 to make contributions to the bill that has been in the public hearing phase since yesterday. The text was created at the proposal of Social Security, Economy and Treasury and is being evaluated by social agents in the final sprint of the year, as this media has learned.
The pension law designated AIReF to indicate whether these measures are necessary. The body chaired by Cristina Herrero will prepare a report with some assumptions already prepared by the Government: it will take the expenditure and income projections of the Ministry of Economy for the Aging Report of the European Commission.
AIReF will ultimately estimate the result of expenditure minus the increase in income after the various contribution increases. If the result exceeds the 13.3% of GDP –the Bank of Spain or AIReF estimated it– the Government will have to adjust said excess spending.
Saiz should convene CEOE, Cepyme, CCOO and UGT to assess the measures that compensate for the higher disbursement expected for Social Security if the public auditor detects an imbalance. First, Saiz must prepare a series of proposals that he will send to the Toledo Pact. Afterwards, the political groups will be able to tweak the proposals within a maximum period of one month. Finally, the Government will send the bill with the measures to the Cortes before September 30.
The last resort solution if there is no such consensus, as the text states, is the closing clause: an automatic increase in social contributions for compensate 20% of the spending deviation each year until new measures are adopted or the overspending is completely corrected.
What is the MEI for?
The so-called MEI is an extra contribution paid by all salaries and fills the Reserve Fund, commonly known by Spaniards as the pension piggy bank. Escrivá hoped to accumulate a fund of up to 130,000 million euros over the next decades that would be used to pay a part of the pensions of the generation of the baby boom in exchange for the greatest effort of employees in the public and private sectors – the self-employed do not pay it. In any case, it is worth noting that This fee is final and does not result in an improvement in future retirement benefits.
The MEI started by raising the contribution rate for common contingencies of private and public sector employees by 0.6 points and will reach, whether or not there are extraordinary revisions, the 1.2 additional points in 2032. Thus, the pension reform that the now governor of the Bank of Spain sealed a year and a half ago plans to maintain this additional effort until 2050.
A few weeks ago, Social Security published its income forecast due to the update of the contribution bases and the relevant increase in the MEI in 2025. It is estimated that this fee will generate 4,403 million next yearincreasing by 690 million compared to last year, and establishing itself as the item that increased the most. This collection increase is justified by the increase in the rate from 0.7% to 0.8%, which will leave the contribution rate for common contingencies at 28.3% of the gross salary.
The Executive estimates that the volume of income from social contributions in 2025 will exceed 177.3 billion euros, 6.5% more than the 166.4 billion expected in the 2024 budget settlement.
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