Pension reform in Spain what are key points and who benefits

“The modernisation of the pension system shields the purchasing power of pensioners and especially favours vulnerable people, those with more irregular professional careers, women and young people”.

The modernisation of the pension system has culminated in the validation in the Congress of Deputies of the norm approved by the Council of Ministers on March 16 to expand the rights of pensioners, reduce the gender gap and establish a new framework of sustainability. The process began in 2021, after the approval of the recommendations of the Toledo Pact the previous year.

The Minister of Inclusion and Social Security, José Luis Escrivá, has stated that it is a solid reform that strengthens the sustainability of the system in the short, medium and long term and that advances equity and solidarity. He has also highlighted that it shields the purchasing power of the eleven million current pensioners, as well as future ones, and is agreed upon and focused on reinforcing income.

Escrivá has also stressed that the reform, worked hand in hand with Brussels, reinforces the first pillar of the welfare state, provides tranquillity and certainty and meets all the milestones of the Recovery, Transformation and Resilience Plan and all the recommendations of the Toledo Pact.

Keys to the pension reform

The reinforcement of income, equity and solidarity of the pension system is based on four pillars:

• Progressive increase in the maximum contribution bases.
• Establishment of a solidarity quota so that the wage bill remains above the maximum base and, therefore, exempt from contributions, contributes to the sustainability of the system.
• Substitution of the sustainability factor by the Intergenerational Equity Mechanism, which specifically benefits young people and increases the resources of the ‘pension piggy bank’.
• A new model for calculating the regulatory base that allows you to choose, without harming anyone, between the current formula (the last 25 years are taken into account) and a more beneficial one for workers with contribution gaps (the calculation may exclude 24 worst months of the last 29 years), which will be applied progressively.

Main beneficiaries of the reform

The changes benefit:

• Young people, by avoiding the cut in their pensions that would have meant the application of the sustainability factor and the 0.25% revaluation, with an accumulated reduction of 50% when they went to retire.
• Workers with irregular professional careers.
• People with lower benefits, by incorporating a progressive improvement in the levels of the minimum contributory, non-contributory and widowhood benefits. For a retired person with a dependent spouse, the minimum pension will rise by 22% in four years and will reach 16,500 euro per year in 2027.
• Women, since the measures to reduce the gender gap in pensions are reinforced, improving the treatment of contribution gaps for women and increasing the complement to reduce the gender gap.

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