The pension reform seeks to delay the real retirement age by two years to 2050
The government and social agents reached this Monday an expected agreement on the pension reform, which will mean the hardening of penalties for early retirement and an increase (double, from 2% to 4%) of the bonuses for each year that the worker remains active. In this way, according to executive sources, by 2050 the Government seeks to delay the effective retirement age by two years, which is currently around 64 and a half years . The legal one, which is around 66 and will reach 67 in 2027, is not altered. The pact has yet to be ratified by the CEOE bodies, which will vote on it this Tuesday.
In addition, the agreement reached yesterday with unions and employers includes the repeal of the sustainability factor promoted by the Government of Mariano Rajoy in the 2011 reform. It will be replaced by an “intergenerational equity mechanism”, yet to be determined, and on the that the Executive and the social agents have not yet begun to discuss, according to government sources.
The Ministry of Social Security has set a deadline of November 15 to agree on the new tool , which would enter into the pension reform via amendment. The Government intends that the new law begins to be debated in the Congress of Deputies from September and is approved at the end of the year.
The agreement reached also contemplates the revaluation of pensions according to the Consumer Price Index (CPI) for the 12 months prior to December of the previous year. Should the CPI turn out negative, pensions would not be reduced, but would remain the same. This and the repeal of the aforementioned sustainability factor, which according to the unions entailed a loss of the purchasing power of pensioners, were the main demands of the workers’ representatives in these negotiations, which have lasted for months.
The new feature
The penalties for the advancement of the pension will be monthly and on the pension itself , that is, they will not be applied on the basis of contribution. In this way, depending on the years of contributions and the time that retirement is advanced, the reduction would vary between 2.81% and 21% in the case of an ordinary retirement; or between 0.5% and 30% if it is a retirement that has been accessed after a dismissal.
These mechanisms will be different in the case of pensions with contribution bases higher than the maximum, for which there will be a transition period of ten years from 2024. For these pensioners the maximum penalty, that is, 21%, is it would apply in 2033, when said transitional period ends.
On the other hand, there will be a 4% bonus for each year worked for those who decide to delay retirement, or a single extra payment that will vary between 4,786.27 euros and 12,060.27 euros, depending on the amount of the pension and whether or not the worker has exceeded 44 and a half years of contributions.
Finally, the text establishes that the State will make an annual transfer to Social Security to help finance the pension system , which will be around 2% of the Gross Domestic Product, as explained by the Workers’ Commissions in a statement. “Thus the fulfillment, to date, of the principle of separation of sources is completed and from now on about half of the increase in additional financing is guaranteed, which our pension system is expected to need by the year 2050,” they said from the Union.
One of the objectives that Escrivá seeks with the new reform is the transfer of the so-called “improper expenses” of Social Security (which according to the minister amount to about 18,000 million euros) to the Treasury and thus end the famous deficit of the coffers of the Social Security. This measure is expected to prepare the accounts for the entry of the baby boom generation into retirement. Thus ends the first part of the pension reform. However, for next year there would be sensitive issues, such as the change in the calculation period of the years worked to adapt the system to the new reality of the labor market or the increase in the contribution bases and maximum pensions.