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This is the second phase of the pension reform: more income from quotas and improvement of minimum pensions

MADRID, 15 Mar.

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This is the second phase of the pension reform: more income from quotas and improvement of minimum pensions


The second phase of the pension reform agreed by the Government, the CCOO and the UGT focuses on obtaining income so that the system can face the financial stresses that the retirement of the 'baby boomers' will entail in the 2030s and 2040s with guarantees .

It also contemplates improvements in the coverage of contribution gaps, in the complement of the gender gap and in minimum pensions, as well as the establishment of a dual system for calculating the pension so that people with irregular work careers do not see diminished his provision.

These are the main measures of the reform:

- Dual model to determine the amount of the pension: this can be calculated either with the last 25 years of contributions or with 29 years of contributions, from which the two worst can be excluded, so that in practice the calculation in this second case will be 27 years old. This new option will be introduced progressively, from 2027 to 2038, the year in which the 29 years (minus two) will be fully deployed.

Until 2040 it will be possible to choose between this option and the last 25 years, while between 2041 and 2043 the 25-year option will increase at a rate of six months per year, from 25.5 years in 2040 to 26.5 years in 2043, being able to be chosen between this period or 29 years (minus the two worst). As of 2044, you will no longer be able to choose and the pension will be calculated with 27 effective years of contribution (29 years minus the two worst). Ex officio, while the two alternatives exist, Social Security will always apply the most advantageous for the worker.

- Solidarity quota: a contribution is established for the part of the salary that does not contribute due to exceeding the maximum contribution base. This will be 1% in 2025 and will increase at a rate of 0.25 points per year until reaching 6% in 2045 (5% by the company and 1% by the worker).

- Intergenerational Equity Mechanism (MEI). The current overpriced MEI, of 0.6%, will rise to 1.2% in 2029, at a rate of one tenth per year and with the following distribution: 1% paid by the company and 0.2% paid of the worker This premium will remain at 1.2% from 2030 to 2050 and may increase automatically if pension spending exceeds 15% of GDP.

- Maximum bases: the maximum contribution bases will rise annually with the CPI plus a fixed amount of 1.2 points between 2024 and 2050. This will imply an accumulated increase of 38% until 2050. The Government will evaluate every five years within the framework of the dialogue the increase in the maximum contribution bases and will send a report to the Toledo Pact Commission.

- Maximum pension: the maximum pensions will be revalued year by year with the annual CPI plus an additional increase of 0.115 cumulative percentage points each year until 2050, which will mean an increase of approximately 3%. From 2051 to 2065, there will be additional increases so that by the end of the period, in 2065, the maximum pension will have increased cumulatively by 20%. As of that year, the convenience of achieving a total increase of 30% will be assessed.

- Increase in minimum contributory pensions: a convergence path is established for minimum contributory pensions to ensure that, from 2027, they are not below the poverty threshold calculated for a household made up of two adults. Thus, taking the evolution of the minimum pension with a dependent spouse as a reference, they will gradually rise between 2024 and 2027.

- Improvement of non-contributory pensions: these will grow until they converge in 2027 with 75% of the poverty threshold calculated for a single-person household.

- Gap coverage: the current gap coverage model is maintained (months in which there is no obligation to contribute and which are taken into account to calculate pensions), but with improvements for women.

Thus, contribution gaps will be compensated with 100% of the minimum base for the first 48 months (4 years), and with 50% of the minimum base from month 49, adding 100% of the minimum base between the empty month 49 and 60 (up to the fifth year) and 80% of the minimum base between the month 61 and 84 (from the fifth to the seventh year). This measure will be in force as long as the gender gap is greater than 5% and may be applied to men in comparable situations.

In addition, the first three years of leave for caring for children and family members will be recognized as contributors, and the self-employed will also have contribution gaps covered for the first time.

- Gender gap: the gender gap complement of pensions will rise an additional 10% to its annual revaluation in the 2024-2025 biennium.

- Limits on the disposal of assets from the 'pension piggy bank': Starting in 2033, the Budget Law will establish the annual disbursement to be made by the Reserve Fund in terms of percentage of GDP, with a maximum limit for each year of the period 2033-2053, which will range from 0.10% of GDP to 0.91%, depending on each year.

- 'Audit' by AIReF: the Independent Authority for Fiscal Responsibility (AIReF) will publish and send to the Government, from March 2025 and every three years, an evaluation report on the impact of the measures aimed at strengthening the income of the system between 2022 and 2050.

If, after AIReF's evaluation, the average annual impact of the income measures is equal to 1.7% of GDP, the average gross expenditure on pensions in the period 2022-2050 may not exceed 15% of GDP. If it exceeds that 1.7% of GDP, pension spending may not exceed 15% of GDP plus the difference between the estimated average annual impact of the measures and 1.7%. And if the average annual impact of the revenue measures is less than 1.7% of GDP, spending may not exceed 15% of GDP minus the difference between the estimated average annual impact of the measures and 1.7%.

In the event that there is an excess in any of these three situations, the Government will propose possible measures to eliminate it. In addition, it will negotiate with the social agents to send a proposal to the Toledo Pact to correct this excess spending by increasing contributions or another alternative formula that increases income or reduces pension spending or a combination of both.

As a result of these negotiations, the Government will send a bill to Parliament containing the appropriate measures by September 30, which will enter into force on January 1 of the following year.

In the event that the law with the corrective measures for excess spending does not enter into force on January 1 of the following year, the MEI price will increase to compensate two tenths of the excess estimated by AIReF as of January 1 of the year. and another two tenths in each of the following years until new measures with the same impact are adopted or excess spending is corrected.

- Partial retirement: The Government undertakes to negotiate before June 30 a reform of the figure of partial retirement in order to guarantee a regime of effective compatibility between work and pension, preserve the quality of employment of relief workers, and balance the cost of this type of pension.

- Observatory for the 'unemployment' of the self-employed: an observatory will be created, within three months from the entry into force of the reform, to improve the efficiency and coverage of the provision for cessation of activity for economic reasons of workers self-employed, as well as the integration of periods without the obligation to contribute. - Contribution for external training or academic practices: students who carry out training practices in companies, institutions or entities included in training programs or who carry out external academic practices will be integrated into Social Security.