The new tax for employees and the self-employed to fatten the pension savings that will take effect in 2023

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The so-called Intergenerational Equity Mechanism will replace the Sustainability Factor approved in 2013

From 2023, the Intergenerational Equity Mechanism (MEI) will be implemented, one of the measures and novelties agreed by the government with the trade unions to fatten the pension savings. This new tax is intended to replace the Sustainability Factor approved in 2013, which according to the CCOO would lead to “a reduction in the amount of future pensions to 25% for younger generations”.

Comisiones Obreras points out that the MEI is the instrument to end “the austerity” that pensioners have already faced. According to the calculations of the union, the reform of the pension system in 2013 caused a reduction in the initial pension amount for employees born after 1954. A decrease that affects even more young people who, since 2057, would have even 19% less in their pension.

The MEI is part of a package of measures aimed at “strengthening the sustainability of the system and safeguarding the purchasing power of pensions”. This year they will also increase the level of pensions by 8.5%. And it is that this benefit has become one of the main long-term challenges: there are not enough workers to meet the payment of an increasingly aging population.

This new temporary tax, which will last until 2032, increases the Reserve Fund that is activated so that pensions are not affected when there are temporary problems between Social Security income and expenditure. Any money raised from MEI to increase this safety cushion will only be used for retirement expenses. This tax translates into a 0.6% increase in social security contributions, of which 0.1% is paid by employees and 0.5% is borne by the employer. Therefore, from the salary of employees and the self-employed who reach 1,000 euros, one euro per month goes to the pension savings account.

According to the cabinet and the trade unions, this form of collection that affects employees and the self-employed will prevent pensions from being cut in the future, even if expenditure is growing faster than expected. After 2032, the date when the MEI ends, it is time to analyze the situation to see if, according to the projections of pension expenditure in 2050, it will be necessary to use the money raised in order not to have to make a decrease.

Source: La Verdad

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