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Pensions: Spain relies on an increase in contributions to restore balance

2021-11-16T18:33:26.436Z


After weeks of discussions, the Spanish government presented its pension funding reform on Tuesday, providing for an increase in ...


After weeks of discussions, the Spanish government presented its pension funding reform on Tuesday, providing for an increase in contributions but no longer working hours. A choice criticized by employers, who fear "

consequences

" on employment. Summoned by Brussels to act to rebalance its retirement system, threatened by the aging of the population, the government of Socialist Prime Minister Pedro Sanchez had ruled out this summer a cut in pensions as well as a lowering of the legal retirement age to retirement.

At the end of an agreement with the unions, he therefore opted for the last lever remaining at his disposal: the increase in social contributions.

This increase of "

0.6 percentage point

" should be "

temporary

", however, said the executive in a statement.

Read alsoThe Senate votes to postpone the retirement age quickly to 64

According to Madrid, the increase will weigh 80% on employers and 20% on employees.

It will come into force in 2023 and will be subject to regular revisions from 2032, after which it can be canceled if the financial state of this pay-as-you-go pension system allows it.

This agreement constitutes "

one more step

" in order to "

ensure the viability of the public pension system

", assured Pedro Sanchez on Twitter, welcoming the green light given to this measure by the two large unions in the country, CCOO and UGT.

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"

Safety net

"

Madrid had presented at the end of August a first part of its bill on pensions, providing to revalue pensions by indexing them to inflation and to encourage employees to work longer, via financial help. But it remained to agree on the most delicate aspect: the "

intergenerational equity mechanism

". This device, which will be incorporated into the text of the law via an amendment, should make it possible to secure the system by supplying the

dedicated “

reserve fund

”.

This fund, created twenty years ago, has counted in the past up to 67 billion euros.

According to the executive, it only contains two today, but should have another fifty by 2032, thanks to increases in contributions.

"

This will help generate a safety net

," insisted the Minister of Social Security, José Luis Escriva.

A

necessary

"

mattress

" to face the "

tensions

" expected when the generation of the "

baby boom

" - which arose in Spain in the 1960s and 1970s - reaches retirement age.

"

No guarantee

"

This reform was one of the conditions set for Madrid to continue to benefit from the post-Covid European mega-recovery plan. For business circles, however, it may not be sufficient to revive the pension system. The new mechanism - which does not affect the legal retirement age, to be gradually increased to 67 years under a reform of the former right-wing government - "

will neither improve the sustainability nor the equity of the government. retirement system

”, thus estimated Tuesday the economists of BBVA Research.

An analysis shared by the employers' organizations, who decided not to sign the executive's agreement to protest against the increase in contributions.

This reform is based "

efforts on companies

" and offers "

no guarantee on the balance of the system

" of pensions.

It could also "

jeopardize the economic recovery by affecting the competitiveness of companies

", with "

negative consequences on employment

", they denounced.

Read also Retirement age: have our European neighbors all already opted for 65?

The pension problem in Spain is made particularly acute by demographics.

The country thus combines the second lowest birth rate in Europe (1.23 children per woman) with great longevity, over 83 years on average.

By 2035, “

we will have 16 million retirees, compared to nine today.

The imbalance will therefore be significant,

”recalls Jordi Fabregat, professor at the Esade business school, for whom the executive should have made a“

more ambitious

reform

.

The government "

chose the easy way

" by increasing contributions.

However, in view of the situation, it would have been necessary to "

play on several levers

", concludes the economist.

SEE ALSO

- Pension reform: "We have failed on this subject", recognizes Bruno Le Maire

Source: lefigaro

All business articles on 2021-11-16

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