The governor considers that raising contributions or raising the real retirement age does not compensate for the repeal of the 2013 reforms
The Bank of Spain has given its verdict on the latest measures approved by the Government to guarantee the sustainability of the pension system, although it considers that these actions will not serve to meet the announced objectives. The governor, Pablo Hernández de Cos, considers that “they are not enough” to balance the Social Security accounts. And he anticipates, once again, that “additional measures” will be necessary to offset the expense involved in the repeal of the 2013 legal reform, promoted by the Government of Mariano Rajoy, which ends the sustainability factor or is linked the revaluation of benefits based on average annual inflation, without limit.
A few hours after Congress approves the package of measures agreed between the government and unions this week – without the endorsement of the employer – the governor considers that the return to the CPI to raise pensions implies an increase in spending in the pension system. 3.3 percentage points of GDP between 2019 and 2050; and it calculates that not applying the sustainability factor –by which the first pension was adjusted based on life expectancy, among other parameters– implies almost one more point of spending based on GDP.
Faced with the suppression of both measures (derogation factor and revaluation limited to 0.25% depending on the Social Security accounts), the Executive has introduced several measures. Among them, the intergenerational equity mechanism that contemplates an increase in contributions of 0.6 points between 2023 and 2032. In addition, a battery of incentives and penalties are approved to bring the effective retirement age closer (64.7 years) to the legal age (66 years in 2021) and State resources are transferred to assume improper expenses that, until now, Social Security had been paying despite being unrelated to contributory pensions.
For Hernández de Cos, the battery of measures aimed at delaying retirement is, he said, “subject to high uncertainty”, with estimates by the Government of between 1.1 and 1.6 points of GDP of lower spending in 2050, while the transfer of resources sanitizes the accounts of the system but not in the Administration as a whole. “These compensation measures are not sufficient to fully compensate and will require additional in the future to compensate, either through income or expenses, these effects,” he asserted.
In addition, the governor warns that inflation could raise pension spending by some 1,500 million euros above the budget for 2022.
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