Spain Moving Forward In Reforming Public Pension System

The Spanish Government and CEOE, CEPYME, CCOO, and the UGT have signed the first agreement for the reform of the public pension system, the aim of which, as underlined by Prime Minister Pedro Sánchez, is to “guarantee the purchasing power of current and future pensions and ensure the financial sustainability of the system to meet the great challenge of the retirement of the baby-boom generation”.

“Today we are taking a crucial step for the Spanish people and especially for our elderly, our pensioners. We are starting to address one of their main demands, one of our main commitments: the revaluation of pensions in line with the CPI, so that pensioners again never lose purchasing power”, Sánchez stressed.

Sánchez’s assurances came at the signing ceremony of the agreement in the gardens of Moncloa Palace.

Sánchez pointed out that this agreement has been reached after intense but essential discussion with the social partners and, importantly, is the first “consensual agreement on pensions to be reached in Spain since 2011”.

The head of the Executive also stressed that this is “the first phase of the pension reform” and as such “is just the beginning of an important reform that will be a watershed in the public pension system in our country, which has been urgently needed for a long time”.

Sánchez recalled that this reform is included in component 30 of the Recovery, Transformation and Resilience Plan, and its motivation is in line with the rest of the agreements and reforms proposed by the Executive, which is quite simply to “improve the lives of citizens, combat inequality, activate economic growth that must be more digital, sustainable, fair, and lasting, and guarantee a better future for everyone. And to honour our commitments to Europe.

Main measures

During his speech, Pedro Sánchez outlined the main new features of the agreement between the government and social partners.

First, a new revaluation formula to maintain the purchasing power of pensions.

Second, measures are envisaged to provide incentives to bring the effective retirement age closer to the legal retirement age on a voluntary basis.

And third, the revenue structure of the system is strengthened and the principle of separation of sources for the benefits and measures whose financing has not yet been taken over by the Spanish State is completed. In other words, “the Spanish State financially supports the system through the General State Budget by providing around € 22 billion per year”.

Sánchez also announced that “the sustainability factor, which reduced pensions over time, will be replaced. In its place will be a new mechanism of intergenerational equity, which will come into effect from 2027, to prevent the younger generations from having to pay for the retirement of more populous cohorts of workers, strengthening the sustainability of the system in the medium and, above all, the long term”.

Expanding on this point, Sánchez explained that a new system of contributions based on real income and improved social protection for the self-employed is envisaged, which will be negotiated with the social partners at the social dialogue table with the aim of starting to implement it from 2022.

Sánchez praised the social partners’ “extraordinary work” and their “enormous responsibility and sense of State”, declaring that the Government will continue to work together and negotiate with them in the coming months to respond to the mandate of Congress and the recommendations of the Toledo Pact.

The head of the Executive similarly highlighted the work his government has done over the last three years in the area of pensions, “permanently revaluing” them and approving the creation of a new supplement linked to maternity and paternity, with the aim of reducing the gender gap, which also exists in pensions.

10 major agreements within the framework of social dialogue

Sánchez also wanted to express the fact that since the beginning of the legislature, the Executive has already signed “10 major agreements with the social partners”: the increase in the Minimum Interprofessional Wage; the five Social Agreements in Defence of Employment; the Agreement for Economic Reactivation and Employment; the regulation of Remote Working; the Law on Riders, and now the pension reform. “Agreements that have no other aim than to secure the rights of citizens and improve the lives of all.”

In this regard, he pointed out that “social transfers, of which pensions are the most important, constitute one of the four pillars of the Welfare State”, and that the Government’s objective is “to strengthen this Welfare State: to guarantee it, preserve it and to it to new times and needs”.

Escrivá is grateful for the “open-mindedness” of the social partners

For his part, the Minister for Inclusion, Social Security and Migration, José Luis Escrivá, thanked the social partners for their “open-mindedness” in the negotiation process, the outcome of which is the “consensus” reached.

Escrivá stressed that the agreement signed today “eliminates uncertainty about pensions for millions of pensioners and future pensioners, and it does so by ensuring and reinforcing not only their sufficiency and purchasing power but also the sustainability of the system in the medium and long term. It also introduces elements of equity that adapt the system to new social and demographic realities”.