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HomeLatest NewsPension reform since April: what does the new solidarity quota consist of?

Pension reform since April: what does the new solidarity quota consist of?

Date: June 3, 2023 Time: 23:27:55

The Government has promoted a pension reform with the aim of “establishing a new sustainability framework for the public system”. The Ministry of Inclusion, Social Security and Migrations has defended this reform based on three axes: sufficiency, equity and sustainability.

To do this, it has applied several measures. Among others, reinforcement of the Intergenerational Equity Mechanism (MEI) in substitution of the Sustainability Factor, a dual regime for the computation period – the last 29 years of the career, discarding the 2 worst years or the last 25 years – and the creation of a solidarity fee.

The latest measure is a novelty and Minister José Luis Escrivá defended it within the measures necessary to reinforce sustainability: “it will provide additional income to the system in the 2030s and 2040s, when the greatest demographic challenge will be faced.”

Above the maximum base

Specifically, the solidarity quota will affect the highest incomes, that is, those who exceed the maximum contribution base. This year the maximum contribution base of the General Regime, regardless of the professional category, is 4,495.5 euros per month. Until now, the amount of salary that exceeded this limit was not contributed to Social Security. From 2025, a rate will be applied to the part of the salary to which the contribution is not applied.

This quota will gradually roll out. It will start with an import close to 1% in 2025 and will increase at a rate of 0.25 points per year, half a point each year. The goal is to reach a quota of 7% -for the highest salaries- in 2045.

But this increase will not be linear, but will vary according to the salary to which it applies. Specifically, in 2025 a rate of 0.92% will be applied for remuneration between the maximum base and an additional 10%, 1% for salaries that exceed between 10% and 50% of the maximum base and a rate of 1.17% for remuneration that exceeds the maximum contribution base by 50%.

Once the planned increases have been applied, in 2045 the solidarity quota will reach a percentage of 5.5%, 6% or 7%, depending on the salary brackets to which they are applied.

No pension improvement

The solidarity quota that the Government has included in the last part of the pension reform entails an overprice that will be distributed in a 5 to 1 ratio between company and worker. However, this additional fee will not mean an improvement in the pensions of these workers.

This is, therefore, a different effect than that entailed by the so-called uncapping of pensions, which is also included among the measures applied. Specifically, between 2024 and 2050 the maximum contribution base -4,495.50 euros per month in 2023- will rise each year the same as the CPI plus 1.2 percentage points.

This will entail a revaluation of the maximum pensions together with the CPI plus an additional increase of 0.115 cumulative percentages each year from 2025 to 2050. workers the increase in the contribution.”

From 2050 to 2065 there will be additional increases in the initial pension in that period. Specifically, from 2051 a path of greater increases is established that begins at 3.2% that year and ends at 20% in 2065.

The contribution base is the gross monthly remuneration received by a worker, including extraordinary payments -prorated because 12 contribution bases per year are taken into account- and other concepts. The Social Security sets a maximum and minimum ceiling each year that serve as a reference to calculate social contributions. These, in turn, generate the right to contributory benefits and finance the public pension system.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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