Spanish Government approves first part of pension reform

by Lorraine Williamson
pension reform
del canto chambers 2

MADRID – Today (Tuesday), the Government has approved the first part of the pension reform. This eliminates the sustainability factor approved in 2013 and links the revaluation of the benefit to the evolution of prices.

At a press conference this afternoon, Isabel Rodríguez, Minister of Territorial Policy, and spokesperson for the executive stressed, “It is the result of the agreement. From now on, no pensioner will have to worry about their pensions. They can be revalued and, if the CPI is negative, they will remain with the figures of the previous year.”

Agreement reached

At the end of June, the Executive, employers, and unions reached an agreement on some of the key problems of the current system:

  • shielding the purchasing power of pensioners
  • modifying the early retirement scheme to bring the effective retirement age closer to the legal one
  • putting the table mechanisms to encourage delay in retirement.

Until July 16, the draft bill for the guarantee of purchasing power was subject to a public hearing and information. And as such, received various technical reports, as well as the opinion of the Economic and Social Council. Moreover, the forecast is for it to come into force in January 2022.

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CPI

The bill, which is now reaching the courts, repeals the sustainability factor that linked benefits to life expectancy and ties the benefit amount to the inflation recorded the previous year. Therefore, it will be updated based on the price index of consumption (CPI), appreciating if it grows. However, in the event of negative values, the amounts will remain frozen.

Retirement age

The new regulation also aims to extend the retirement age from 64 years to the legal one (66). To this end, incentives have been established to postpone retirement. And bonuses will be offered for each extra year that a worker remains in the employment after reaching legal retirement.

Furthermore, the transfer of the Social Security deficit to the State accounts is established. Therefore, it is not covered by the workers and companies by their contributions.

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