The first part of the pension reform introduced the Intergenerational Equity Mechanism (MEI), a surcharge on contributions paid by workers and employers with the direct purpose of filling the so-called ‘pension piggy bank’ until 2032. Social agents and the Ministry of Inclusion, Social Security and Migration, led by José Luis Escrivá, agreed that this would represent 0.6% of the gross salary and that the majority would be assumed by the employer. The ‘extra’ contribution began to be applied in January 2023 – despite the rule being approved in 2021 – since which time it has accumulated income amounting to 1,453.73 million euros, according to data shared by the portfolio.
The MEI has substantially increased the organization’s collection, so much so that it is equivalent to 30% of the surplus registered by Social Security as of July 31, 4,774 million euros. Income from contributions is at historic highs and has grown more than in the previous 16 years, as highlighted by Escrivá’s department. In the first seven months of the year, it has experienced an increase of 10.2% to reach almost 89,000 million euros, of which, in turn, 1.8% is determined by extraordinary contributions made as common contingencies of the mechanism of equity.
The budgets of the Ministry of Social Security foresee that MEI contributions will amount to 2,793.16 million in all of 2023, which is still a small part of the total, which exceeds 152,000 million in these calculations. Although its weight will increase progressively each year, given that in the second part of the pension reform, agreed only with the workers’ representatives – CCOO and UGT – it was developed that its percentage would have doubled in 2029, it is That is, it would be 1.2% after advancing at a rate of one tenth per year. At that time, the transitional period would end and that rate would be maintained – 1% for the employer and 0.2% for the worker – in order to feed the Social Security Reserve Fund.
The Ministry’s Plans Spend Between 2,000 and 3,000 Million Euros to the Huchha Annually, Therefore, It Will Close 2023 With 5,347 Million, Although the President of the Government – NOW IN WORK – Expressed HIS Will to Increase Contributions to 5,000 million to add a total of 20,000 million at the end of the legislature. Much of this behavior will be determined by the evolution of the labor market, which has resisted the challenges of the economy during the first half of the year but is beginning to show signs of slowdown and job destruction. Spain was at its highest level of Social Security affiliation at the beginning of summer and was close to 21 million active workers.
However, the other part of the increase in MEI income will be determined by whether or not it is used as a lever to stabilize the public pension system, as stated in the standard approved in March 2023. The pension law provides for periodic reviews of the Independent Authority for Fiscal Responsibility (Airef) that can lead to an automatic increase in this overpricing, the first program for 2025. The body led by Cristina Herrero must determine whether the income designed in the reform represents more, less or the same as 1.7% of GDP and if spending does not exceed 15% of GDP (with nuances).
In the event that the accounts do not add up and the Airef detects excess expenses, the Government of the day must begin a negotiation with the social agents to agree on measures to cover it and then send them to the Toledo Pact Commission. The reform grants the Executive a few months of margin until January – the first in 2026 – at which time, if the new guidelines have not been approved, the MEI will be raised as much as necessary to reimburse two tenths of the excess spending each year until measures are taken for the same value or the extra expense is corrected.
