The so-called Intergenerational Equity Mechanism will replace the Sustainability Factor that was approved in 2013
Starting in 2023, the Intergenerational Equity Mechanism (MEI) will be implemented, one of the measures and novelties that the Government agreed with the unions to fatten the pension piggy bank. This new tax is intended to replace the Sustainability Factor that was approved in 2013 and that, according to CCOO, its continuation would lead to “a reduction in the amount of future pensions of up to 25% for younger generations.”
Comisiones Obreras points out that the MEI is the tool to stop “the cuts” that retirees were already suffering. According to the union’s calculations, the 2013 reform in the pension system was causing a reduction in the initial amount of the pension for workers born after 1954. A drop that affects even more young people who, since 2057, would have even a 19% less in your pension.
The MEI is part of a package of measures that aim to “strengthen the sustainability of the system and guarantee the purchasing power of pensions.” This year they will also raise the amount of pensions by 8.5%. And it is that this benefit has become one of the most important challenges in the long term: there are not enough workers to face the payment of an increasingly aging population.
How the MEI will be paid
This new temporary tax that will last until 2032 to increase the Reserve Fund that is activated so that pensions are not affected when there are temporary problems between Social Security income and expenses. All the money collected from the MEI to increase this security cushion will only be used for pension spending. This tax translates into an increase in social contributions of 0.6%, of which workers will assume 0.1% and 0.5% will be borne by the employer. Therefore, one euro per month of the salary of employees and self-employed workers who reach 1,000 euros will go to the pension piggy bank.
According to the government and the unions, this form of collection that affects employees and the self-employed will prevent pensions from being cut in the future even if spending grows more than expected. After 2032, the date that the MEI ends, it will be the moment that the situation will be analyzed to see if, according to the forecasts of pension spending in 2050, it will be necessary to use the money collected so as not to have to make a decrease.
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