The so-called Intergenerational Equity Mechanism (MEI) is launched to fatten up the pension savings
This new year means the entry into force of a new tax that will be deducted from the wages of employees and the self-employed. The so-called Intergenerational Equity Mechanism (MEI) is one of the measures included in the Act to Guarantee the Purchasing Power of Pensions and other measures to strengthen the financial and social sustainability of the public pension system published in 2021, which started in 2023 . This novelty is the result of the agreement with the unions to fatten up the pension savings.
The new tax is one of the changes that will take effect in 2023 and will remain until 2032. The MEI replaces the Sustainability Factor that, according to the CCOO, reduced the amount of pensions for younger generations by as much as 25%. For this reason, Comisiones Obreras ensures that this mechanism is the way to stop “cuts” in retirement. According to the union’s calculations, the reform of the pension system in 2013 caused the original amount of the pension for workers born after 1954 to fall. up to 19% less pension.
Employees and the self-employed pay this tax through their payroll. The MEI translates into a 0.6% increase in social security contributions, of which 0.1% is paid by employees and 0.5% by the employer. In the case of an average premium income of EUR 1,976.42, this means EUR 1.98 of the gross monthly salary, while companies assume EUR 9.88. This figure drops when the salary is lower and rises for those higher payrolls. So if you collect 1,000 euros, one euro per month will be deducted from your salary, while for the maximum contribution base, employees pay 4.14 euros and companies 20.7 euros.
Therefore, the money collected from the contributions of employees and the self-employed will be used exclusively for the costs of pensions. This means an increase in the Reserve Fund that would be activated so that pensions are not affected in the event of temporary problems between Social Security income and expenditure. At the same time, this 2023
the minimum and maximum amounts of the pensions increase 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.
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 on which the MEI ends, it is time to analyze the situation to see if the pension expenditure projections in 2050 indicate the need to use the money raised and the amounts.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
