The Minister of Social Security began the week by going to Congress to explain how the negotiation for the pension reform is progressing and he received sharp criticism from all groups -except the socialist- accusing him of a lack of transparency and consensus, of wanting to cut benefits and to avoid the own recommendations of the Pact of Toledo. He assures not to take for granted and attributes it to the electoral stage in which we are. Meanwhile, he continues his roadmap to balance Social Security accounts.
-Is the agreement for the first package of pension reform measures close? Because the unions not only deny it but also speak of a blockage in social dialogue.
-Social dialogue is fluid and permanent. I believe that this type of criticism must be interpreted as narratives in negotiation processes. I do not give more relevance. The compromise is that the first block of elements of the modernization of the pension system has to be approved by Parliament this year. I believe that the agreement is close.
-He has also been criticized by many parliamentary groups, including those of his government partner, United We Can, who opposes the revaluation formula and increasing the years of calculation to calculate the pension.
-I didn’t understand it that way. Keep in mind that we are in the pre-election period. Of course, what I propose is the position of the whole of the Government, as it cannot be otherwise. What I bring to Parliament has already been discussed within the Government.
-You want to prohibit forced retirement in the agreements, do you have the support of employers for this measure?
-That clause has two years of life and is unprecedented in neighboring countries. Retirement is a right, but it becomes an obligation through an agreement between third parties. It is an anomaly that they can force a person who does not want to retire. What we have admitted in the negotiation is that forced retirement be maintained at 68 years, which is the French model, instead of at 65. We have to establish longer working careers where we can change what everyone does in the company, but it is not possible to go to the easy solution of expelling him against his will from the labor market. Because we know that people feel fuller when they are active. We must seek to disengage from the job market not abruptly. All modalities of partial retirement, active retirement, delayed retirement can establish flexible mechanisms.
-What incentives will there be for companies that keep older workers?
-There may be some specific contribution reduction mechanisms and there are also other formulas that can reduce the labor cost of older people. We are discussing them.
-Your redesign of the reducing coefficients for early retirement has not been very well received. In certain months and for high pensions it penalizes more.
-For most people the penalty improves. Does it make sense that if you are among the highest incomes the penalty is 4% and in an average pension it is 16%? That is why those with higher incomes retire earlier. This is regressive and we have to correct it. And I think everyone will agree. The rest are technical adjustments that improve the monthly profile a bit.
-How much can the effective retirement age be delayed with this system and how much can the system save?
-If we manage to get a sufficient number of people to retire a month later, which does not change their lives for it, the added effect is significant, it has a very large effect on the sustainability of the system. Parametrically it is the most important thing of all that is spoken.
– Would you be willing to eliminate negative inflation compensation in the revaluation of pensions, which is an element that the unions reject?
-We have understood that simplicity is important. Working with expected inflation, which then had to be corrected, was a problem. We have seen with the social agents that a very simple system is to always use the inflation of the previous year. It remains to be seen what treatment to give to the exceptional situation of the years in which there is negative inflation. It is an open topic. What we are going to do is bring the result to the Toledo Pact every five years so that the maintenance of the purchasing power of pensions can be verified.
- Collective negotiation.
“We will allow forced retirement but from the age of 68”
“We will raise pensions with the CPI of the previous year and there will be no more compensatory payments”
-When pensions are raised with the CPI of the previous year, in times of rising inflation trend, pensioners will have a lower rise than that recorded in the cost of living and vice versa when the inflationary trend is downward.
-The purchasing power must be evaluated in windows of a certain time. Every solution has a problem. Using inflation from the previous year, purchasing power is holding sooner or later, with a small lag.
-The pay to compensate for the deviation of inflation, will it no longer exist?
-How will the new sustainability factor be?
-We want to discuss it with the social partners this year so that it can be taken to Parliament next year. As the sustainability factor approved by the PP is not being applied there is no rush to repeal it. Both the sustainability factor and the revaluation index have to give certainty about the process of building a pension throughout its working life, because the adjustments that have a sudden impact on existing pensioners or at the time you enter the pension is quite unfair and creates a lot of problems.
-Will the minimum pensions go up more than the rest next year?
-As long as there is margin in the Social Security accounts, we will continue to increase them more than the rest.
-When will the new self-employed contribution system be applied?
-The system may be for 2022, understanding that any deployment will be gradual. It is not about changing the system at once, but we will do it in phases.
-How are you going to balance the Social Security accounts if you say that there will be no cuts, with the incorporation of the cohorts of the ‘baby boom’ into retirement and guaranteeing the maintenance of the purchasing power of pensioners? We have been hearing for years that measures must be taken to avoid the bankruptcy of the system.
-The most important element that can help reinforce the sustainability of the system are all the voluntary incentives for the effective retirement age to approach the legal age. That is the most powerful mechanism of all. For years we have been listening to a whole set of pessimistic, highly biased and interested projections that pose unrealistic scenarios about the pension problem in Spain in the medium term. Spain has already set the legal retirement age at 67 years, France has its pension reform stranded in the Senate to go from 62 to 64 years. The 2011 reform that was carried out in Spain contributes a lot to sustainability. Spain has spending on pensions around 12% of GDP and France has more than 14% and Italy more than 15%. Spain has a pension problem associated with the ‘baby boom’ that must be addressed, but it is much more manageable than is said. In fact, the European Commission has revised down its scenario of the impact of the ‘baby boom’. It would be necessary to analyze the interests of those who propose such alarmist scenarios. Social Security, with the level of social contributions and benefits it has, is a fairly sustainable system if we make a series of additional adjustments. There is not much to change either.
-When and how will the budget balance be achieved?
-We must achieve the budgetary balance of Social Security at the end of the legislature. When the pre-pandemic levels are resumed, it will be seen that this deficit has disappeared.
-Will Social Security have a surplus in 2024?
-You will have balanced accounts.
-Will you make contributions to the pension box again?
-I do not know. We have not considered it. This issue of the piggy bank is relatively inconsequential because to the extent that the fund is financed in public debt, they are communicating vessels.
-So you are more in favor of Social Security getting into debt if you need the money to pay pensions instead of resorting to the Reserve Fund?
-What Social Security has to do is have reasonably balanced accounts because its income and expenses are well designed and that is what we want to do at the end of the legislature.
– There will be no moneybox for pensions then?
– It is something that I have not considered. It is not a model that generates particular enthusiasm for me.
-How is the Minimum Living Income going? Are they going to reevaluate it?
-We are verifying that the rate at which benefits are being granted continues to advance. This month we can be close to 280,000 beneficiary households and with the regulatory changes we try to reach more households that are not asking us for the minimum income. We have about a million cases resolved and there is a very high percentage of denials because the levels of income and assets are well above the threshold to grant it. The challenge is to see exactly why those who might not ask for it. We are working with NGOs and municipalities to facilitate the entire process.
-What is the percentage of denial?
-Around 70%. It is not surprising this level in these types of requests. The regional minimum incomes in the common regime territory had about 200,000 beneficiaries in total after several decades of implementation. In ten months, we are going to have 300,000 beneficiaries and we want to reach 800,000 households, but we are aware that it will take time.
-Are those 280,000 beneficiaries included the 200,000 from the autonomous communities?
-Very few, because we have found that many of its beneficiaries exceeded our income and equity thresholds and we have denied it. It must be borne in mind that the autonomous communities do not contrast for income and assets. We cross-reference the data with the income and wealth declarations of the Tax Agency and we have denied about 100,000 applications for exceeding the equity threshold.
-Are the autonomous communities giving aid to those who do not need it?
-There are different systems in the communities, but they are more about handling partial income data, payroll … It is a less sophisticated model than ours. Had we used the model of responsible income tax return that had been proposed to us as a solution, we would have had to claim reimbursement from some 600,000 families.
– Would you repeat as minister?
-I don’t have much time to think about it. It is being intense. But being the minister of Spain is always an honor.
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