The Bank of Spain estimates that if only increased to age 35, the reduction for new retirees would be more than 8%, which would be added to the 5% drop resulting from the increase over the past 25 years.
Extending the retirement calculation period from 25 to 35 years of premium would mean an 8.2% reduction in the benefit paid to new retirees, but the amount would not change if the worst six years were excluded, the Bank of Spain said in a Thursday publication. report, exactly when negotiations on the second phase of the reform of the system have just started, in which agreement must be reached before the end of 2022 on an extension of the calculation deadline, as promised with Brussels.
As a rule, this measure entails a reduction in the wage bill of the elderly. “The average starting pension is a monotonously decreasing function of the number of years taken into account for the calculation of the regulatory basis,” emphasizes the regulator in that report. In fact, the 2011 reform, which included an increase from 15 to 25 years, has already led to a 5% decrease in pensions, which would be added to that 8.2% in the event that, as urged by the European Commission, will rise to 35, according to the estimate of the public body.
However, workers already thinking about retirement are getting some rest after Social Security Minister José Luis Escrivá reversed his initial decision and promised last Monday that the government will not extend the retirement period to 35 years. “Under no circumstances will it try to extend the calculation period to 35 years,” he said, although he admits that “it may make sense to extend the calculation period, but at the same time choose the best and in turn rule out the holes. .” It will be a reform of “minor changes to improve the fairness of the system”, it says.
But it’s not trivial what those “small adjustments” are, because depending on how it is adjusted, the pension will grow or decrease. Or you can even stay as is. This is the executive’s goal: that the reform be “neutral” at the budget level – as Escrivá reiterates – but that it provides a “new, fairer formula” for new careers, as one in three workers has the best years of their career. contributions are no longer the last, as was the case before.
The idea that now hangs around the minister is therefore to extend the calculation period, but at the same time to include other elements in the final formula, such as excluding a certain number of – yet to be determined – years and improving the coverage system for premium gaps. (periods in which no premium is paid due to not working). This formula of “simultaneously extending the calculation period to 35 years with the elimination of the most unfavorable years would make it possible to mitigate the decline in the average initial pension, while reducing the heterogeneity of pensions between individuals,” explains the Bank of Spain out.
The report simulates the impact of considering the 29 most favorable years within the 35 years prior to retirement. As a result, the average pension would be practically comparable to the current one, as it would only experience a 0.1% drop. However, this formula would benefit the lowest pensions (Ulas that are below the median), while it would lead to a reduction of the highest.
“Prolonging the calculation period would have a heterogeneous effect among retirees. In particular, the effect would be less for pensions below the median, resulting in less inequality,” the agency emphasizes.
Source: La Verdad
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