The Congress of Deputies gave the green light to the New State’s general budgets, with 188 votes in favor on December 3. They enter the new retirement measures and pensions that will come into force on January 1, 2021. This draft bill must go through the Senate, to then be definitively approved in Congress at the end of December.
Also, the Toledo Pact was approved after four years of negotiations, which become 22 recommendations for the new configuration of pensions. All in all, what changes will there be on January 1, 2021 with retirement and pensions? These are some of the measurements.
Revaluation of pensions by the CPI
The negotiations envisage that pensions will be linked to the IPC (Consumer price index). The agreement establishes that “the annual revaluation of pensions based on the real CPI is presented as the mechanism that must serve to preserve the purchasing power of pensions.” However, “there is not enough political and social consensus” to take into account only the CPI.
Of course, what the almost ten million pensioners will see is an increase of 0.9% in pensions for next year. For those assistance benefits, the increase will be double, 1.8%.
Retirement is delayed at age 66
Another significant change is the one that has to do with the retirement age. In 2021, this is delayed to 66 years for those who have worked less than 37 years and three months. By contrast, for those who want to retire at 65 must have contributed 37 years and three months, or more. The Government thus intends to delay the retirement age as much as possible, since the average in recent times was 64, a year earlier than what is set by law.
For all this, the minister Jose Luis Escrivá wants to penalize the retirement age and encourage people to do so beyond the legal age. Another recommendation they make from the Ministry of Social Security is that the worker can choose the 25 years that suit him best to calculate the pension and not be harmed.
The measure of delayed retirement age has a double bottom. On the one hand, that the worker continues to contribute for more years to continue financing Social Security; on the other, that access to the pension, and therefore to public spending, be delayed to the maximum. For example, if a worker is active until age 67, it will be two years that they contribute to the pension fund and not consume from it.
Clean up the accounts with taxes until 2023
One of the contributions made by the Toledo Pact is to clean up the accounts within a period set until 2023. The plan consists of separating the Sources of funding, so that contributions are increasingly focused on paying retiree, disability and widowhood pensions. It is proposed that paternity / maternity benefits, the supplement to retirement pensions for women who have been mothers, as well as contributions to boost employment be paid with taxes.
These expenses have a cost of 23,000 million euros. The Budget Plan that was sent to Brusales says that the State will pay taxes on 11,000 million of that bill. Therefore, what Escrivá intends is for the State to assume the cost of some expenses that it does not consider to be Social Security are assumed by the State.
Income contribution for the self-employed
The commission accepted that the group of the self-employed can contribute according to their income. Likewise, the Toledo Pact proposes to advance on five points for the reform: family care and professional careers, equal pay, contribution gaps, part-time employment and sufficient minimum pensions.