The agreement has been reached without the backing of the employer, which refuses to raise social security contributions to fill the ‘piggy bank’ of pensions.
The Spanish Government has agreed this Monday with the UGT and CCOO unions the new Intergenerational Equity Mechanism (MEI) that includes a contribution of 0.6 points via Social Security contributions from 2023 to 2032 to sustain the increase in pension spending.
The agreement has been reached without the support of the Spanish Confederation of Business Organizations (CEOE), which this morning already expressed its refusal to raise social contributions to fill the ‘piggy bank’ of pensions.
As reported by the Ministry of Inclusion, Social Security and Migration in a note, the MEI will consist of two components. The first will consist of the reactivation of the Social Security Reserve Fund through a “finalist contribution” between 2023 and 2032.
This contribution will be 0.6 percentage points of the contribution for common contingencies, and will be distributed between the company and the worker “with the same distribution as in social contributions.”
Its function will be to act as a “safety valve” for the system as of 2033, in the event that there is a deviation from the forecast of pension spending for 2050.
If this does not occur, no measure will be applied and the use of the reserve fund resources will be considered for reduce social contributions or improve the amount of pensionsadds the statement.
The agreement reached this Monday also contemplates that if from 2033 a deviation of the forecast of pension spending to 2050 is seen in the Aging Reports of the European Commission with respect to the 2024 report (which will be used as a reference ), this Fund will be used, with an annual disposal limit of 0.2% of the Gross Domestic Product (GDP).
In case of being insufficient, the Spanish Government will negotiate with the social partners for its elevation to the Toledo Pact. The objective will be to arrive at a balanced proposal aimed at reducing the percentage of pension spending in terms of GDP or increasing the contribution rate or other alternative formulas to increase income, according to the ministry in the statement.
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