The Ministry of Inclusion and Social Security radically changed its strategy in the pension reform when it saw that no political actor supported its approach to extending the computation period, even if it was allowing the suppression of the two worst years. “That made us rethink how to deal with the matter,” say ministry sources. The difficulty is that with the system finally agreed upon, which combines the current 25 years with the 29-year option, eliminating the two worst years, the formula is no longer fiscally neutral and a greater adjustment must be assumed.
Added to this is the arrival of the baby boom generation in the 2030s and 2040s, the increase in minimum pensions and the reduction of the gender gap. “If we do not want cuts, we had to look for alternative formulas,” these sources add. They discarded the 2013 Popular Party government reform path, because they say, “it was a financially sustainable reform, but socially unsustainable”, and they acted with an increase in income through the three known paths: uncapping of the maximum bases, increasing of the intergenerational equity mechanism (MEI) and introduction of the solidarity quota.
A set of measures that, according to the Minister of Inclusion and Social Security, José Luis Escrivá, will allow the pension reform to be here to stay for many years because “it is well done” and, furthermore, it has the support of Brussels. Faced with criticism from the CEOE and warnings from the PP that it will change it if it reaches the Government, Escrivá replies that “it is a reform for many years and that it provides a lot of peace of mind and certainty to pensioners.” He said it when presenting the reform after it was approved by the Council of Ministers this Thursday.
He presented it at the same time that support from political forces was being added to the reform in exchange for private concessions. Specifically, the PDECat agreed to introduce the principle of progressivity in the solidarity quota, so that three different sections are established based on salary. , and with Bildu it was an increase in widow’s pensions.
Regarding the solidarity quota, what used to be a percentage that would reach 6% in 2045 for the part of the salary that exceeds the maximum contribution base (currently it is 4,495 euros per month), now this percentage is distributed in three tranches, depending on income level. The percentages will be 5.5%, 6% and 7%. It does not change the final result, but the load on each group does.
On the other hand, widow’s pensions will rise by 17% in four years in the case of individual pensions and 30% in those with a dependent spouse. It is one of the modifications introduced in the reform after a pact between Bildu and the Government. The change was already included in the latest draft that was distributed to the social agents on Wednesday.
Specifically, these pensions will increase, already in 2024, 40 euros per month for individual pensions and 126 euros for widows with a dependent spouse. The increase implies an increase of between 1,775 and 3,800 euros for four years. In a statement, Bildu states that the agreement will mean that “no widow’s pension is below the poverty line.”
On the other hand, Escrivá specified that the so-called pension piggy bank, the reserve fund that will feed the MEI, will add between 120,000 and 130,000 million at the beginning of the 2040s. It is a saving that will be used to gradually disburse from 2032 , to overcome the additional effort that the largest number of pensioners will require from the system until 2050.
From the Ministry of Inclusion they insist on the pyramidal effect of the arrival of baby boomers at retirement; that will cause spending to rise as fast as it will fall at the same rate a decade or two later.
