Government passes pension reform plan
THE COALITION government approved its reform of the pension system at a Cabinet meeting yesterday (Thursday).
With the trade unions backing the plan, the country’s main business association, the CEOE, has said that they will not support it.
Minister for social security, José Luis Escrivá presented the reform last Friday after final details were agreed with coalition partners, Unidas Podemos.
Talks started with unions on Monday to garner their support, which was achieved by Wednesday. The CEOE has criticised that the main cost of funding the plan will fall on employers, which they reject, claiming it will damage the job market and reduce the competitiveness of businesses.
The principal aim of the reform is to ensure that there is sufficient funding available in the future to support the huge burden of public pensions, with people living longer and a greater percentage of the population being of retirement age.
Expenditure on pensions was equivalent to 12% of Spain’s GDP last year and is set to reach 15.5% between 2045 and 2050.
Pensions have also gone up this year by 8.5% to keep up with the cost of living hikes.
The Spanish government agreed with the EU that they would reform the public pension system – something which had to be done before they could receive the latest round of Next Generation funding from Brussels.
This is the second part of the reform process, which was started last year.
What is in the plan?
There will be a change in the way that pensions are calculated. Retirees can choose to have their ‘wage’ worked out over the last 25 years in which they contributed to the social security system (the current system); or take 29 years, removing the ‘worst’ two years and having it calculated over a period of 27 years.
The dual system will work until 2044, when the 27-year option will become the only one available.
There will also be increases in minimum pensions allowing people to claim top ups to ‘take them out of poverty’.
Residents who have had periods when they have not
contributed to the social security system will be provided with more cover, which will boost their final pension.
They will receive ‘100% of the minimum base’ for the first four years outside the system, and 50% of the minimum thereafter, with self-employed women also getting a better deal.
To fund the system, people earning over €54,000 a year will pay more; as will employers for each of their workers.
What have they said?
The CEOE said they were completely against the proposal.
In a statement they claimed the cost would ‘fall on workers and businesses via a general rise in social security payments which will affect the salaries of all employees and increase labour costs, putting job creation at risk’.
They claimed it would lead to ‘more years at work’ and lower pensions.
The CEOE called for more debate involving all sectors of society.
However, general secretary of the CCOO union, Unai Sordo has backed the deal.
He said that ‘with political will’ the public pension system will always be safe.