The Government has approved this Tuesday the first part of the pension reform, which eliminates the sustainability factor approved in 2013 by the PP and which links the revaluation of the benefit to the evolution of prices. “It is the result of the agreement,” stressed the Minister of Territorial Policy and spokesperson for the Executive, Isabel Rodríguez, this Tuesday at the press conference after the first Council of Ministers held after the summer recess. “From now on, no pensioner will have to worry about their pensions, they can always be revalued and, in the event that the CPI is negative, they will remain with the previous year,” he said.
At the end of June, the Executive, employers and unions had reached an agreement on some of the key issues of the system: shielding the purchasing power of pensioners, modifying the early retirement scheme to bring the effective retirement age closer to the legal one, and putting the table mechanisms to encourage delay in retirement. The draft bill for the guarantee of purchasing power has been subject to a public hearing and information until July 16 and has received various technical reports, as well as the opinion of the Economic and Social Council. The forecast is for it to come into force in January 2022.
The bill, which is now reaching the courts, repeals the sustainability factor that linked benefits to life expectancy and ties the amount of benefits to the inflation recorded the previous year: it will be updated based on the price index of consumption (CPI), appreciating if it grows. In the event that it returns negative values, the amounts will remain frozen.
The new regulation also aims to extend the real retirement age, currently at 64 years, so that it is closer to the legal one (66), and thus favor the sustainability of the system. To do this, incentives have been established to postpone the moment of retirement – with bonuses for each extra year that a worker remains in the market after reaching the legal retirement age – and at the same time reducing coefficients of benefits for those workers who intend to retire earlier of time. The forced retirement agreed in the collective agreements is also limited, although with some exceptions that go through encouraging permanent hiring and, in the most masculinized sectors, promoting that of women.
Likewise, the transfer of the Social Security deficit to the State accounts is established so that it is not covered by the workers and companies with the contributions.
The objective of this first part of the reform, to which Spain has made a commitment with the EU to unblock community funds, is to “modernize” the “pension system with a fair recovery in mind,” said Rodríguez. The definition of a new intergenerational equity formula that will replace the sustainability factor is left for later. In this phase, it will also be necessary to address the new real income contribution system for the self-employed, and the gradual increase in the maximum contribution bases.