Concerns over gradual privatisation of pensions in Spain

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private pensions

The Spanish Communist Party (PCPE) has expressed concerns about the gradual privatisation of pensions in Spain. The party accuses the PSOE-Sumar government and the unions CC.OO and UGT of promoting private pension plans despite their claims of defending public pensions.

In a recent statement, the Partido Comunista de los Pueblos de España (PCPE) outlined its position. Following a Marxist-Leninist ideology, the party sits at the far-left end of the political spectrum and was founded during a congress held between January 13 and 15, 1984, by various organisations that split from the Partido Comunista de España (PCE).

The ‘Escrivá Law’ on pensions

In June 2022, the Law on the Regulation of the Promotion of Occupational Pension Plans, better known as the ‘Escrivá Law,’ was approved. This law addresses the challenges of the current pension system and focuses on sustainability, adequacy, and equity, considering the rising pension expenditures expected by 2040 due to the ‘baby boom’ generation.

Key measures include:

  • Penalties for early retirement and bonuses for deferred retirement.
  • Monthly calculations for pension reductions, with greater penalties for early retirement.
  • Increases in pension contributions and benefits starting from 2022 over thirty years.

Despite some opposition due to the perceived ‘tax burden’ of the measures, this reform was approved by the Spanish Congress of Deputies. However, the PCPE argues that the law threatens public pensions. One of its provisions allows companies to contribute up to €400 less per employee to Social Security.

Impact on workers

The PCPE contends that the introduction of Occupational Pension Plans (PPE) shifts part of the social contributions to private pension plans. This reduces the base for public pension contributions without improving the welfare of workers with low and middle incomes or young workers in precarious situations.

The communists also highlight that while PPEs mean savings for companies, they lead to a loss of purchasing power for employees. Furthermore, the institutions managing the funds benefit from guaranteed commissions. The five administrators financially benefiting from PPEs include Caser Pensiones, GPP (CC.OO.-UGT and BBVA), Ibercaja Pensiones, Santander Pensiones, and VidaCaixa.

Role of the unions

Despite their rhetoric in defense of the public pension system, unions CC.OO and UGT participate in the management of occupational pension plans. According to the PCPE, they thus contribute to the gradual dismantling and privatisation of the public pension system.

The Spanish pension system

Spain’s pension system is a social insurance system operating on a pay-as-you-go basis, meaning the current working population funds the pensions of today’s retirees.

Key aspects of the system include:

  • Types of Pensions: Various pensions exist, including old-age, widow(er)’s, orphan’s, and family pensions in case of death.
  • Contribution Period: The pension amount is calculated based on the contribution period and salary during working years.
  • Retirement Age: The legal retirement age is gradually increasing to 67 years but can vary depending on the number of contribution years.
  • Funding: The system is financed through contributions from employers, employees, and self-employed individuals, as well as general tax revenues.

The system faces challenges such as an aging population, increased life expectancy, and the economic pressure these factors place on pension financing.

Also read: Spain must count on record amounts for pension payments

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