The Minister of Inclusion, Social Security and Migration of the Government, José Luis Escrivá, announced this Monday that the Government has reached an agreement with the unions to increase the contributions in the margin of the negotiations on the pension system. Of the 0.6% that the contributions will increase, they have finally decided that 0.5% will correspond to the companies and 0.1% to the worker, although at first the company would assume 0.4% and workers 0, 2%.

After the employer’s refusal to accept the agreement, the Government and the unions have decided to change the percentages and now the employers will pay 0.5% more than what they paid. Therefore, the final agreement is more damaging to the entrepreneurs than initially foreseen. That is, they will pay 0.5% more to Social Security per worker and workers will charge 0.1% in favor of the pension money box.

Escrivá celebrates the agreement

This agreement “will avoid the cuts in the initial pension that the current Sustainability Factor entailed,” Escrivá said in the tweet in which he announced the new intergenerational equity mechanism.

Escrivá has met this Monday with unions and businessmen to try to close the Intergenerational Equity Mechanism (MEI) of pensions with an agreement after his latest proposal to raise social contributions by 0.6% for ten years to face future spending tensions of the system. However, after several hours, the employer’s association has disassociated itself from the agreement, considering it “insufficient”.

The minister’s message comes after the employer’s rejection of the Government’s proposal. Escrivá explained that in this way “the agreement signed with the social agents on July 1 to deploy the first block of the pension reform is specified” and that “it will be included by means of an amendment to the bill that is currently being processed in The congress”.

The employer opposes the agreement

Hours before closing an agreement between the Government and unions, the CEOE employer has abandoned the negotiation in disagreement with Escrivá’s proposal on the increase in contributions. The CEOE executive committee has rejected the Government’s proposal in relation to the Intergenerational Equity Mechanism for pensions, which should replace the Sustainability Factor, considering that it is “insufficient”, that it “does not guarantee the balance of the system” and that “it will need additional measures in the future to ensure its sustainability.”

In this sense, the employer’s association considers that increasing social contributions and placing the greater burden on companies “has negative effects on employment” and goes “in the opposite direction to what the public pension system needs.” “The growth of employment is the main guarantee of sustainability of the pension system”, alleges CEOE, who also considers that the Executive’s proposal “has little intergenerational” since it “burdens all efforts on current and future workers, especially on Young”.

Precisely this Monday ended the deadline that the parties had given each other to reach an agreement on the MEI, which will replace the so-called sustainability factor of the 2013 reform.

Rise in prices

The rise in prices for the MEI of 0.6% would begin to take effect from 2023 with the aim of fattening the Pension Reserve Fund, which currently has just over 2,100 million euros, and thus be able to cope to future expenses.

This agreement will be reviewed in 2033 and if it is overcharged, the money can be used to pay more pensions. However, if it is not enough and is undercharged, the government may cut pensions or increase contributions further, or both.

The increase in social contributions would mean being able to meet the expenses that future retirements will imply. baby boomers, those born between 1958 and 1977. In this period almost 14 million people were born, 2.5 more than in the twenty previous years and 4.5 million more than in the twenty following years.