Spain's Congress approves overhaul of state pensions

 

The Spanish Congress has definitively approved a bill overhauling the system for raising state pensions without the support of the opposition, labor unions and employers.

The new law that will come into effect at the start of next year decouples annual rises in state pensions from inflation, replacing it with a system that, as well as the evolution of the consumer price index, takes into account the outlays and revenues of the Social Security system during a period that includes actual figures in the 5 years prior to the review and projected figures for the next 5 years.

The government insists that the aim of the new arrangement is to eliminate sharp falls or increases in benefits due to changes in the economic cycle.

The system sets a minimum increase of 0.25% and a ceiling of 0.5% plus the annual rate of inflation. The government claims this will safeguard the spending power of pensioners over the medium term but unions and the opposition insist that it will have the opposite effect.

The overhaul of the pensions system also introduces a sustainability factor. Starting from 2019, pension benefits will be calculated based on life expectancy at the time, with reviews and subsequent adjustments every five years after. The law also leaves the decision on the values used to calculate annual pension benefits increases up to the Independent Fiscal Authority.