Fedea notice: the pension reform will generate savings of just 0.39% of GDP

The recently approved pension reform is “very far” from guaranteeing the sustainability of the system and returning it to balance. This is stated emphatically by the Foundation for Applied Economics Studies (Fedea), which returns to the charge against the law designed by the Minister of Social Security, José Luis Escrivá, with a new, more complete analysis published this Monday in which it quantifies the effects of the different measures of the reform on the income and expenses of the system. Their verdict is clear: this second phase of initiatives will generate “in the best of cases” a net saving equivalent to 0.39% of GDP in 2050.

“The norm reduces the expected imbalance of the system over the coming years, but only modestly, therefore falling far short of guaranteeing its sustainability, as is often proclaimed,” denounces the new study carried out by this ‘think tank’.

Specifically, the measures contained in this royal decree – which may undergo modifications when processed as a bill – will imply an expenditure of 0.51% of GDP and a saving of 0.90% in 2050, which would lead to the net savings for all the measures was only 0.39% of GDP. Thus, the system will have to pay an extra of more than 2,320 million euros (0.16% of GDP) already in 2023 for the additional increase in minimum pensions and the improvement of the gender gap supplement, which will rise by 10 % in the next two years, will mean another additional 94 million.

Fedea estimates that, in 2050, the increase in minimum pensions and the complement of the gender gap contemplated in the reform will mean an expense of 0.28% of GDP, while the changes in the initial pension derived from the extension of the period calculation over 29 years (discarding the two worst ones) will imply a cost of 0.18% of GDP. To this we must add the expense for the increase in the maximum pension, which Fedea estimates at 0.05% of GDP.

Changes in the MEI

On the other hand, the increase in the overpricing of the Intergenerational Equity Mechanism (MEI) from 0.6% to 1.2% will allow income in 2050 worth 0.40% of GDP, the same percentage that will be entered by the unstopping of the maximum bases, although calculated in constant terms. In this sense, Fedea asks to take advantage of the processing of the reform as a bill to clarify the wording of the MEI and link its activation in the event that the system needs adjustments to a maximum limit of the basic deficit of the whole of Social Security expected on average. between 2022 and 2050.

In addition, the solidarity quota established by the reform to tax the highest salaries will provide income of 0.10% of GDP.

Fedea also warns that with the accumulated increase of 38% of the maximum bases until 2050 and the quasi-freezing of the maximum pensions – which will barely increase by 3,155 in the coming decades – the principle of contributory of the system is put at risk, since the maximum pension will be reduced from almost 80% of the maximum contribution base to 59.3%.

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