Tuesday, September 26

The Government gives the green light to the 2.5% increase in contributory pensions

The Minister council has given the green light this Tuesday to the increase and revaluation of pensions for 2022 to guarantee the purchasing power of pensioners. Contributory pensions will rise from this January’s payroll and will do so on 2,5%; while non-contributory pensions, the passive classes, the minimum amounts of non-contributory benefits and the minimum vital income (IMV) will be 3%. A total of 11.5 million people They will benefit from the increase formally approved this Tuesday and to pay for it the State will allocate a total of 6,500 million additional euros (if the ‘paguilla’ also approved and which will be paid this January) is added.

“A framework of absolute certainty is beginning”, declared the Minister of Inclusion and Social Security, Jose Luis Escriva, at the press conference after the Council of Ministers. As of the reform that fully enters into force this Tuesday, pensions will rise each year according to what the average inflation of the year rises. That is, adding the CPI for each month from December of the previous year to November of this year and dividing by 12. Without the need for any negotiation within the Government, or between political parties, employers or unions.

Within the framework of this reform and consequently to maintain purchasing power, the Government has also approved the so-called “paguilla”, an extra that compensates for the deviation between the 0.9% that pensions rose in 2021 and the final average inflation that was 2.5%. Pensioners will receive it at the end of this month and the amount will vary depending on the usual amount of their pension. On average, according to Social Security calculations, that payment will be about 250 euros.

Escriv√° has valued the increase in public spending required by the approved reform and which represents a change in orientation with respect to the mechanism inherited by the PP. According to this, pensions would have risen by 0.25% in 2021, 10 times less than what pensioners will finally receive.

He has also wanted to value another pillar of his reform and which in turn buries a central element of Rajoy’s: the repeal of the sustainability factor. This matched life expectancy to the amount of the benefit, reducing the amount as people lived longer. This element was never applied, but, according to Escriv√°’s calculations, it would currently have meant a 7% cut in the pension of today’s retirees.

“The change cannot be more marked,” he defended. The Government has partially replaced this cost-reducing element with an increase in income by raising company contributions and discouraging early retirement for workers.

With the increase, the minimum retirement pension will stand at 10,103.8 euros per year in 2022 in the single-family case and will reach up to 12,467 euros in the case of a dependent spouse, while the maximum retirement pension will reach 39,468.66 euros per year .

Deficit of 1% of GDP

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Escriv√° has insisted in his speech that this improvement in benefits will not be detrimental to the deficit Public Social Security, which has been estimated at the equivalent of 1% of Spanish GDP. According to the list of benefits updated also this Tuesday, Spain maintains public spending on pensions of 12% of GDP despite the increase. And it is that the good evolution of the job and the additional income that their contributions are injecting -the Social Security coffers enter 4% more than before the covid- allow the “strength” of the system to be shored up, according to the minister.

In this line of discharging expenses to the Social Security coffers so as not to contribute to the deficit, the State will derive a total of 18,300 million euros from the General State Budgets this 2022. An item that Escriv√° has described as “improper expenses” and that involve social benefits, but are not paid for with contributions. In 2021, Social Security already derived as “improper expenses” a total of 13,800 million euros. The Government’s forecast is that in 2022 the Social Security deficit will continue to fall and close in the 0.5% of PIB.