Minister Escrivá has closed an agreement with the unions to support pensions that will imply the worst part for companies. The scheme involves a 0.6% rise in the price from 2023 and over a period of ten years and of that percentage, 0.5% will be paid by companies and 0.1% by workers. The agreement becomes tougher for employers after this morning they decided to unanimously reject the proposed rise in employment taxes as a solution to prop up retirements.
The intergenerational equity mechanism (MEI) initially presented to social agents charged a tenth less to companies and one more to workers, but In just a few hours, the centrals have made the distribution more advantageous for the workers.
The new scheme carried out by the minister reflects that this additional contribution will be accumulated in the so-called ‘pension money box’, the reserve fund, which will function as an income “cushion” to face the challenge of the retirement of the ‘baby boomers ‘. Escrivá’s plan is to achieve in ten years a cushion of 41,000 million with which to refill the “piggy bank”.
The idea of the Social Security holder is that these extra income act as a “safety valve” of the system as of 2033, in the event that there is a deviation from the forecast of pension spending for 2050. In the event that it does not Should there be a deviation from the planned spending path, no measure will be applied and the use of reserve fund resources will be considered to reduce social contributions or improve the amount of pensions.
According to the agreement with the unions, if from 2033 the European Commission’s Aging Report shows a deviation in the forecast of pension spending to 2050 with respect to the 2024 report (which will be used as a reference) , the aforementioned fund will be used, with an annual disposal limit of 0.2% of GDP. And if the disposition of the fund’s assets is not sufficient, the Government “will negotiate with the social partners for their elevation to the Toledo Pact, a proposal that, in a balanced way, is well aimed at reducing the percentage of spending on pensions in terms of GDP, either to increase the rate of contribution or other alternative formulas to increase income “.
Entrepreneurs today distanced themselves from the Minister of Social Security and have denied him their support in one of the key elements of the pension reform. This was clear this morning at a meeting of the CEOE executive committee, in which there was unanimity in its rejection of the aforementioned mechanism proposed by Escrivá.
In a statement sent by CEOE, the businessmen have assured that the proposal of «insufficient, does not guarantee the balance of the system and that it will need additional measures in the future to ensure its sustainability. ‘ Criticisms that have also been heard in the academic world since Escrivá’s approach was known.
Both CEOE and Cepyme have also remarked that increasing social contributions and making the greatest burden fall on companies «has negative effects on employment and it goes in the opposite direction to what the public pension system needs. The employers also charge the ink against the Executive’s proposal that, they say, “has little intergenerational since it charges all the efforts on current and future workers, especially on young people.”
Approving this mechanism is the thorniest task of the first leg of the pension reforms that Escrivá did manage to agree on in the summer. In fact, its complexity led to it being removed from the package of approved measures and an extra period was given until November 15. Beyond this mechanism, social agents and the Government did agree link pensions back to the CPI, transfer the so-called improper Social Security expenses to the State and changes in bonuses to extend working life and delay entry into retirement.
George is Digismak’s reported cum editor with 13 years of experience in Journalism