Escrivá increases its proposal to raise contributions to pay future pensions to 0.6 points

The Government has increased from 0.5 to 0.6 points your proposal to upload worker contributions with which to pay for future pensions; as confirmed by sources of social dialogue. The Ministry of Social Security held a new meeting with employers and unions this Monday at noon to advance in the second phase of the reform of the pensions. The meeting has focused on discussing the new formula that the team of Jose Luis Escrivá proposed last week to the social agents, which consists of the creation of a temporary tax on the social contributions of current workers to feed the pension piggy bank and be able to pay for part of the increase in additional spending that the State must assume when the generation of the ‘baby boom’ start to retire. And Escrivá suggests that this increase of 0.6 points is distributed as follows: 0.4 points for the company and the other 0.2 for the worker.

Consulted Social Security sources have described the meeting as “productive” and “with progress” and have begun to continue negotiating with employers and unions electronically during the next few days. At the moment, as confirmed by the Escrivá ministry, there is no new date set for all parties to meet again in person. The clock is ticking and is that the maximum term that the Executive himself set to close this issue with the social agents – what he has called the ‘Intergenerational Equity Mechanism‘- expire next November 15. Subsequently, the Government intends to incorporate the agreement (or not) via amendments to the pension bill that is already being processed in Congress and that includes the first block of the pension reform, with measures such as the increase in pensions according to the IPC or the penalty system for early retirement; among others.

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The increase in contributions proposed by Escrivá would represent an increase in monthly costs of just over five euros for a worker with a salary of 1,000 euros and of about 9 euros for one with a salary of 2,000 euros. Employers and unions are now fighting to finish defining in what proportion it will be the company or the worker who will bear this cost. For now, the Executive’s proposal is to distribute that greater burden for companies than for employees. Currently the social contributions paid by each permanent worker are around 38.5% and are distributed to 6.35% for the worker and 32% for the company.

The new ‘Intergenerational Equity Mechanism’ aims to shore up the public pension system through new income – and thus avoid cutting spending -. With this temporary rate, Minister Escrivá hopes to collect per year -and until 2032- the equivalent of two tenths of Spanish GDP, which would be about 2.6 billion euros every year. What in a period of 10 years would be 26,000 million, plus the income from financial returns that the State obtained from the management of that piggy bank.

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