Tuesday, July 5

United We Can and the PSOE rectify to save Escrivá’s public pension fund

The new law on company pension plans, which includes the creation of a public promotion fund, has taken a new step forward after its convulsive processing. United We Can has finally voted in favor of eliminating the amendments that the Parliamentary Commission had managed to include in the law with an error vote by the PSOE and that included, among other issues, reducing the income tax bonuses and the unstopping of the maximum bases of contribution, that is, to the highest salaries. The confederal group has supported the particular votes presented by the socialists to rectify these errors and thus facilitate the processing of this law.

The plenary session of Congress has debated this Thursday the opinion that had come out last week from the Labor and Social Security Commission of the Lower House after a complex vote in extremis so that this new private savings vehicle could start up. In an act that several groups have called “grotesque”, “chaotic” or “carajal”, the PSOE ended up voting in favor, by mistake, of four amendments proposed by its government partner, United We Can, and which included eliminating the limit maximum of the contributions of the highest salaries. Quickly, the socialist group registered different individual votes to knock down these amendments.

In the vote that took place at the stroke of noon in Congress, the confederal group has finally ended up voting in favor of these particular votes that, in practice, eliminated their amendments. The deputy of United We Can Isabel Franco Carmona has announced in her position in the lower house that she had reached an agreement with the minister, José Luis Escrivá, to “unstop public pensions.”

Sources from the Ministry of Social Security insist that there is no news about the maximum pensions and the maximum bases outside of what has already been agreed in component 30 of the Recovery Plan, of the pension reform. The reform to increase what the highest salaries contribute, the maximum contribution bases, was left for the second block of changes. A debate that has not yet started in the social dialogue and that is expected to involve a progressive increase in what workers with higher salaries contribute, as well as an increase in their pensions.

After Isabel Franco Carmona’s announcement on the rostrum of Congress, sources from United We Can explain to this medium that the minister “has promised to address” the unstoppable, the purple formation’s proposal to end the maximum cap on the price of the highest salaries. Those of United We Can have announced this movement at a difficult time for the parliamentary group. Its deputies have ended up voting in favor of the particular vote of the PSOE that knocked down the proposals of United We Can in order to save the pension fund law.

United We Can has had a critical position against the law of Minister Escrivá, which seeks to promote employment pension plans, complementary to public benefits, and which those of the purple formation have criticized for being a step of “privatization” of the system. In the negotiation of the legislation, it was finally EH Bildu who extracted an important commitment from Social Security in exchange for abstaining from the vote: the increase in non-contributory pensions by 15% until the end of the year. This, according to parliamentary sources, left United We Can in a complex position because they had ended up supporting the rule without getting a large return in return.

During the afternoon it was finally approved and sent to the Senate with the support of Ciudadanos, PNV and PDeCAT and the abstention of EH-Bildu. For their part, the PP, Vox, Esquerra Republicana, the CUP and Más País-Equo have voted against. From now on, the initiative will continue its processing in the Upper House and will only return to Congress to endorse or revoke the changes that the Senate may introduce to the future public pension fund.

The United We Can amendments had to decline for the pension fund rule to go ahead. For many reasons. The first, because (even assuming that PSOE and United We Can agree on the unstoppable contribution of higher salaries) the Government cannot afford to approve such a far-reaching measure via amendment when there is a commitment to address this issue in the social dialogue. Second, because this measure would end parliamentary support for the law as a whole to be approved, for example, with the votes of the PNV. Third, because support was not guaranteed either with the elimination of tax benefits for collective employment pension plans. This withdrawal was also already having repercussions with the unions and businessmen. The first collective pension plan announced at the mercy of the new regulatory framework, that of construction, I was hanging by a thread in case these modifications went ahead.

A new public pension fund

There are three pillars in the pension system. The first and fundamental in Spain is the public, which depends on the contributions of the workers. The third is the opposite extreme, private contributions to citizen pension plans. The second is the one that the Government tries to cement with this law, since in Spain it is much less developed than in other European countries. These are employment pension plans, which are the contributions agreed with companies to private retirement savings vehicles. The new law strengthens collective bargaining and aims to facilitate the inclusion of this savings alternative in agreements between unions and companies.

The main novelty of the law, and what it is best known for, is that it includes the creation of a public pension fund. This measure consists of formalizing a vehicle to which SMEs and the self-employed can join, where this second pillar hardly reaches, which will be promoted by the Government, with the participation of different ministries such as Economic Affairs, Labor, Finance and Social Security itself. These funds will be promoted by the State but their management will be transferred to the private sector.

Since this new public fund was originally announced until its final processing, some aspects have been changing, such as the disappearance of commissions or the governance model of this investment vehicle. In addition, in the amendments agreed with the different groups to carry out the rule, tax incentives have been included in the Corporation Tax so that companies benefit from these public promotion funds for their employees.

The promotion of the second pension pillar has raised criticism in the financial sector. The main recrimination made by banks and insurers is that the Government has promoted a transfer of the tax incentives that individual funds had to collective funds. Two years ago, a client with an individual private plan could contribute up to 8,000 euros, which could be deducted in personal income tax. After the latest Budgets, this limit has been set at 1,500 euros.



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