Planned pension reform in Spain: pension reform without social conflict

The socialist Sánchez has negotiated a reform of the pension system. It includes additional income for the cash register and an increase in lower pensions.

Spain’s Prime Minister Pedro Sanchez Photo: reuters

MADRID taz | Different to in neighboring France Spain reforms its pension system without triggering a social conflict. The left-wing government under the socialist Pedro Sánchez wants to improve the income of the pension fund and at the same time raise the lower pensions. The retirement age, which is disputed in France, was raised to 67 in Spain in 2011.

The unions will agree to the reform in their governing bodies this Wednesday. The Minister for Integration, Social Security and Migration, José Luis Escrivá, is still in talks with the employers’ association CEOE. But even if no agreement is reached, the pension system will be reformed. The minority government of the socialist PSOE and the left-alternative Unidas Podemos (UP) is supported by several smaller formations in Parliament.

The amounts for pension insurance are to be increased slowly but steadily for everyone. Instead of the previous premium adjustment based on the inflation rate, a further 1.2 percentage points per year will be added in the future. For the first time, earnings above the previous upper limit will also be subject to social security contributions. This means that anyone who earns more than 4,070 euros gross per month must pay a “solidarity levy” for the income above that. This levy is set to start at 1 percent of salary above the cap in 2025 and increase to 6 percent by 2045.

In addition, the “Mechanism of Intergenerational Justice” levy introduced a few months ago will be doubled from 0.6 percent. This levy, which is paid by companies, is intended to ensure that reserves are created so that the entire cost of the baby boomer pensions is not incurred when they are all retired. Overall, social security revenues are expected to increase by 15 billion euros per year.

Against obsolescence and for social justice

With the pension reform, the Sánchez government not only wants to secure the system in view of the increasing aging of the population, but also improve income for socially disadvantaged pensioners. The minimum pension is to be raised to 60 percent of average income. The minimum pension was increased by 8.5 percent at the beginning of the year and is now just under 1,000 euros a month for pensioners with spouses without income and just under 800 euros for single people and those with a partner with income. Those who have never paid into the pension fund or have not paid long enough should in future be entitled to 75 percent of the poverty line (595 euros).

Brussels approves the reform of the Spanish government – the financial security of the pension system is one of the conditions for the Corona aid from the EU.

The Association of Spanish Employers CEOE rejects the reform project because it lowers workers’ wages and increases costs for entrepreneurs. “There is no framework for negotiations,” explains CEOE spokeswoman Rosa Santos. Sánchez wanted them to “just applaud”. “In reality, Sánchez is presenting a reform that has already been agreed with the European Commission, within the government and probably with left-wing groups,” Santos said. Minister Escrivá wants to negotiate with the employers’ association by Easter, before the final draft law is ready.