Contributory pensions will rise by 3.8% in 2024, which is the rounded average of the CPI of the last 12 months, as established by the revaluation system. The increase will be applied to 10.1 million contributory pensions (most of them retirement, but also others such as widowhood, orphanhood and disability), which will have a budget impact of 6.4 billion euros. A year ago, when inflation was peaking, the increase in pensions was 8.5%. The moderation of the CPI will partially alleviate the burden for the State, which nevertheless has in the pension system deficit one of its weak points and most necessary to correct.
Revaluing pensions according to the CPI aims to ensure that their recipients do not lose purchasing power due to the increase in prices, and it is one of the outstanding measures of the reform led by the previous Minister of Social Security, José Luis Escrivá. This reform, which was completed last March, takes on the mission of guaranteeing the sustainability of the pension system, at a critical moment that coincides with the entry into retirement age of the ‘baby boom’ generation, which is larger than the later. In Spain there is a pay-as-you-go pension financing system, which means that expenses (the amount of benefits) should be covered by income (employment contributions). Escrivá designed a reform that would face the difficult challenge of facing the progressive aging of the population without subtracting purchasing power from pensioners, that is, without cutting expenses, but rather increasing income, with measures such as delay retirement age or the intergenerational equity mechanism (MEI). A proposal with which he managed to get the partners of the coalition government to agree, which was approved by a large majority in Congress and which convinced the European Commission to deliver the Next Generation funds.
With the reform underway, we must ensure that the premises with which it was created are maintained. Some organizations, such as Airef a few months ago and more recently the OECD, doubt that they are fulfilled. They point out that the Government’s forecasts were too optimistic and that perhaps more adjustments will be necessary in the coming years. We will know in 2025, when Airef, as supervisor, will carry out the first review of the sustainability of the model, and will continue to do so every three years. The control, demanded by Brussels, guarantees that the gap does not widen, but no one escapes the fact that a pension review in a few years would not be easy to explain to the citizens.
Improve employment data It is the b side of a pension system that depends on the contribution of active workers and companies. The Government’s economic team has a complicated agenda, which will force it to search for dialogue with social agents and support in a more complex political framework than in the previous legislature. However, the clashes between vice presidents Nadia Calviño and Yolanda Díaz, over the reform of the unemployment benefit and the increase of interprofessional minimum wage, seem to be going in the opposite direction. Inflation subsides, but it cannot be considered over. Interest rates push down economic growth. And the European Union is preparing more demanding tax rules. A strong Government will face these challenges better than one weakened by internal tensions.