It is pertinent to state the nature of the new surcharge that the 20.2 million workers currently registered with Social Security will see on their payroll as of January 1, 2023. All of them, without exception, will be subject to this new contribution, which will mean 0.6% of the salary and will be used directly to re-float “Piggy bank” for pensionsalso known as the reserve fund.
The procedure was approved in December 2021 and published in Bank of England As part of the first part of the pension reform that has already started since the beginning of 2022. Now, there are many critical points about this specific point of reform, in fact, questioning its modus operandi.
It replaces the sustainability factor
The origin of the intergenerational justice mechanism goes back to the government’s interest in replacing the sustainability factor that was endorsed by the PP in 2013. This was due to come into effect in 2018 and was extended until 2023. Last December, the sustainability factor was permanently abolished and set to 2023 The Entry into forceR for the new intergenerational justice mechanism.
What is a direct “tax” on pensions?
The former sustainability factor served as a kind of proportionality between pension expectations during the years in which it was to be received based on the number of years of life expectancy. In other words, pensions are reduced if the life expectancy of the beneficiary increases from the age of 65. This form, repealed, will not be applied. The measure included discounts of up to 20% in new benefits.
The alternative, the mechanism of intergenerational justice, is quite different. In the first place, the amount of pensions is not touched upon. That is, it does not reduce spending on pensions. The mechanism was simply conceived as a new share paid by workers, by everyone without exception and regardless of salary level. Specifically, it is applied in the form of a new price and will be 0.6% of salary. Fees that will appear on employee payroll, and will also be charged to the self-employed.
It is conceivable to raise an amount of money high enough to be able to help Social Security to cover all expenses in pensions when they begin to retire. childbearingwhich is the time when the greatest tension is expected for the accounts of the public pension system, which will need funds outside of regular contributions.
How much money does it take
The equity mechanism will make up 0.6%, of which the employer pays 0.5%, and the worker pays the remaining 0.1%. From CC.OO. The UGT estimates that on average some 5 euro per month for the average worker for their private account.
to me employeesFor example, with payroll totaling €2,000, a 0.6% increase would mean a fee of €12 per month: 2 euro The worker will pay it and the company will take care of 10 euros. Logically, this amount may vary depending on the level of payroll, but not the percentage that will apply.
A fee will be charged for 10 years
From here comes estimates of the effect of the measure on the coffers of Social Security and questioning it. As understood, in fact, it assumes The first direct “tax” Which is applied in Spain to pay pension. And it has reached the final stage, that is, the executive authority may not use these funds for any purpose other than to cover pension payments. It will be deposited into the Social Security Reserve Fund known as ‘pig’s bank’ of pensions.
In the initial idea of the government, the Ministry of Social Security expected to raise in this way about 50,000 million euros. None of that. The government itself has already lowered this forecast to 22 billion euros, less than half of what was initially expected. As confirmed by the government, it is temporary: it will be collected over the next ten years, Between 2023 and 2032.
Why is Brussels asking for it to be amended?
This is where the measurement shows feet of clay. The 22,000 million expected to be collected in the contract equals one of the two additional payments Social Security pays to retirees throughout the year. Or the equivalent of two regular months’ installments. no more.
Thus, the measure may not achieve the initial objective set by the government of filling the “piggy bank” to the necessary levels. This scenario has already been planned by the government. The fact is that if, by 2033, pension spending projections are observed to paint a Social Security deficit scenario in subsequent years, then The second part of the mechanism.
More share or lower pension
If the time comes, the mechanism of intergenerational justice has not been enough and the deficit in social SecurityThe measure page should be explored in a consensual manner between government, political parties and social agents.
There will be only two options: either reduce the proportion of pension spending in terms of GDP, that is, a Interest cutsor an increase in the subscription rate, so that 0.6% of the salary is deducted.