Wednesday, January 19

Escrivá and the ‘paganinis’ of pensions

I no longer have any doubts. The people at the head of the Ministry of Social Security will be condemned in the coming decades to be transmuted into a version of Victor Frankenstein, the character in Mary Shelley’s novel and, thus, contribute with their contribution in turn to the creation of a monster, which is what our pension system has already become.

Trial (patch) and bug. It is clear that this is the philosophy that we are suffering from and that awaits us in terms of pensions in the coming decades.

Measures taken from a hat that are released in the media as probe balloons and that never materialize, others that are recovered after being eliminated by the previous Government and others that are approved until future reviews discover that they have not served much. and are discarded or modified.

Partisan interest in pensions

This scheme -actually- gives a good example of the partisan interest of our political class in the matter of pensions.

Another thing that I am clear about is that the losers in this story are going to be the middle classes, who are and will continue to be the paganis of this and of all the reforms that are to come.

From the last batch of measurements out of the ministry of José Luis Escrivá I would like to stop today on the one that will increase the maximum contribution bases from next year until reaching 60,000 euros in 25 years. Where will this measure be in 25 years?

As a person’s salary increases, their contribution base increases, which is nothing other than the amount of money on which the system applies a rate (percentage) of contribution to deduct from their salary.

This ‘subtracted’ amount is used to finance current pensions and is computed for that person’s future pension. Well, at present, the contribution base is capped at 4,070 euros per month.

In other words, people with a salary higher than that figure do not contribute more to the pension system. On the other hand, the contributory pensions that will be received after retirement are also limited above a maximum of 2,770 euros.

Shadow tribute

Thus, we can see that those people with a gross salary between 2,770 and 4,070 euros are contributing more to the system than the system will report to them in the future. This is what is called a shadow tribute.

With the extension of the maximum contribution bases that will begin to be applied from next year (and that will raise those 4,070 current euros to 5,000 euros), the number of middle-class citizens that will be affected by this toll or tribute in the shade it will be much greater.

In other words, actuarial equity is lost and the lack of contributivity increases, since many more people will contribute proportionally to the pension system, much more than the system will give them on the day they retire.

A few days after advancing this measure, Escrivá wanted to clarify in a forum that “everything that increases the [máxima] it will entail an “equivalent” increase in the pension, “as if this were to mitigate the totality of the drastic measure of inequity that is introduced into the system.

In roman paladino, what the minister meant is that, for practical purposes, almost all the people who today are affected by that shadow toll will be increased.

With the exception that there will be many more, specifically all those who charge between 48,840 and 60,000 euros gross per year, which have become the payees of pensions.

In the next rostrum we will dissect the Intergenerational Equity Mechanism, a new smoke screen that is based on capitalization, whose acronym MEI, also has its crumb.