Pensions will rise next year by around 4%. This is the figure that the Government manages and has communicated it to Brussels in the report ‘Projections of Public Expenditure on Pensions in Spain’ that it has sent to the European Commission and with which it puts an end to the reform of the system that it began. in 2021. It was the last step left to meet all the committed milestones and thus be able to receive another new tranche of European funds.
The figure, however, is not yet final, since inflation data for October and November are still missing to know the exact amount by which public benefits will be revalued. But the Ministry of Social Security is already convinced that the increase will be “in a range between 3.5% and 4.5%”, taking into account that the average inflation of the last nine months is 3. .88%. «The variations can no longer be very large. It will not be 2% or 5%,” said sources from the department led by José Luis Escrivá, who, however, pointed out that “it is impossible to know what may happen in the coming weeks.”
What they did affirm categorically is that this new historic increase, the second highest in the last fifteen years after 8.5% this year, will already materialize in the January payroll even if there is no Government or General Budgets. And, in the same way, they confirmed that minimum and non-contributory pensions will increase more than that 4% at which they place average inflation for 2023, as stated in the new rule.
Although this new revaluation will mean another extra effort for the pension system, already very stressed for more than a decade, the Government rules out that the corrective mechanism that was introduced in the last pension reform will be activated and that would imply adopt cuts or activate additional income measures, such as raising social contributions, if spending soars more than expected and deviates from the path of sustainability.
It will not happen because at no time, not even in the late 40s and early 50s, where there will be a greater avalanche of retirements, will Social Security spending on contributory pensions exceed 15% of GDP, according to the report. , which must still receive approval from Brussels.
Specifically, the Government projects that net spending on pensions will average 14.2% of GDP during the years 2022 to 2050, but it reduces this disbursement to an average of 12.4% once the income generated by the pensions is incorporated. measures implemented in the reform, such as the increase in maximum contributions, the new solidarity tax, the intergenerational equity mechanism (MEI), as well as incentives to delay the real retirement age or penalties for early retirement. This means, therefore, that all these measures will mean an extra injection into the system of 1.8 percentage points of GDP per year on average over the coming decades.
The corrective mechanism included in the reform, which would entail additional increases in contributions, is activated when the difference between pension spending and the income expected with the new measures exceeds 13.3%, a limit that in no case is exceeded. , according to the Government’s projections, which differ greatly from those made by the Independent Fiscal Authority (Airef), which does contemplate that there will have to be additional measures since, in its opinion, spending skyrockets above 16% of GDP .
Most optimistic scenario
But for Escrivá’s forecasts to be fulfilled, the macroeconomic scenario he draws must also be fulfilled, much more optimistic than that of Airef. Thus, the minister contemplates a growth of the economy of 2.5% during the next decade and a much higher productivity than the current one, he estimates that some 300,000 immigrants will arrive each year and that the labor market will practically have full employment from the decade of the 40s, with an employment rate close to 80% and unemployment of 5.5% in the 50s, similar, therefore, to that of other advanced countries such as Germany.
In addition, the minister is counting on his measures to work and the effective retirement age to be delayed to the point that workers over 65 will more than double. In this scenario, there will be an increase in the average retirement age of 1.6 years in 2050, according to the report.