Spanish government proposes an increase in contributions to cover baby boomers' pensions

MADRIDThe Ministry of Inclusion and Social Security has proposed to the social partners -main trade unions and employers' organisations- a temporary increase in contributions to fill the reserve fund, better known as the pension fund, which currently only has around 2,000 million euros, and to cope with the increase in the cost of benefits once the baby boomers retire, the generation born in the 1960s, which is the largest and which will also generate higher pensions than the current ones due to their working life.

The proposal, advanced by the El País and confirmed by sources familiar with the negotiation to the ARA, means increasing contributions by 0.5% for ten years from 2023, ie, to act on the revenue side as unions wanted but employers reject. If this were not necessary, the Spanish government would propose to "return them" through a reduction of contributions or an increase in pensions, sources from the Ministry of Social Security have explained to the ARA.

Review every three years

This, however, would be the first tool that would make up the intergenerational equity mechanism, which has to replace the sustainability factor of the Popular Party of 2013, which was applied automatically. The other element would be to review every three years, starting in 2032, if benefit spending "deviates" from the 2050 forecast. "If the forecast changes a lot, additional measures would be taken and action would be taken on expenditure and then on revenue", the same sources told the ARA. If the forecast remains the same, nothing would be done. In fact, the Minister of Social Security himself, José Luís Escrivá, explained that the intergenerational equity mechanism was proposed as a "contingent" tool, in case the scenarios and measures proposed so far by the Spanish government were not necessary.

"It is the beginning of the negotiation", negotiation sources have explained to the ARA. In fact, until now the Ministry of Social Security had not proposed how to establish this mechanism, which aims to preserve the balance of the pension system in the long term and equity between the different generations of pensioners. The date that had been set with the social partners to close a proposal was next 15 November, although sources of the negotiation explained that it could be extended a few days if it is necessary to "close all the details". The meeting between the Ministry of Social Security and social partners in order to continue negotiating this tool will be next Monday.