‘Baguilla’ expired for pensioners, why?

More than 9 million Spanish pensioners will never again collect the famous “paguilla” that is paid in the first months of the year. It wasn’t just another payment, Social Security pays it as a necessary supplement to ensure the purchasing power of retirees is maintained, but the new law linking pension revaluation to the CPI abolishes permanently “Baguela”.

The origin of the “baguilla”

Payment by linking pensions to the consumer price index began in the mid-1950s. 90. The goal was clear: to correct the deviation between the increase in pensions that is determined each year, in the preparation of public budgets, and the final level of recorded inflation.

The problem stems from the way pensions have so far been linked to price increases, as a guarantee of maintaining the purchasing power of retirees and retirees. Since the constant rise in budgets is usually done in a month September Looking at the following year, it was made based on CPI forecasts of official bodies, if in the end there was a discrepancy in that inflation due to macroeconomic factors (such as private demand increasing more than expected, which usually leads to higher consumer prices) was It is necessary to compensate for the CPI difference. This continued until this year between January and February of the following year.

The obvious example is Another “Baguilla” The accused is in Spain, the last in history if the current law remains the same. The government raised pensions by 0.9%. Since last year’s CPI averaged 2.5%, the government had to make a one-time payment of up to 1.6% of the annual pension between January and February of this year. This was the last “Baguilla”.

The new law puts the final touches on compensation

Now, with the approval of the first part of the public pension reform in December 2021 in Congress Which came into effect on January 1 this year, the revaluation equation changes.

Average height CPI From the twelve months prior to November of the current year. In other words, for the rise in January 2023, Twelve months before November 2022 – i.e. from December 2021 to November 2022, both included -. In this case the average inflation in that period would be 8.5% at the expense of knowing the progress of the CPI next month.

This is done in order to be able to adjust the retiree payroll in advance in a timely manner, and for the updates to become effective from the first day of the January. This process takes place during the month of December and for this reason the calculation is made with the average recorded up to the penultimate month of the year.

Now, even with after one yearRetirees are guaranteed to maintain purchasing power. Since the rise of the year in question, for example 2023, which will be the highest and most expensive in history, 8.5%, will cover all the purchasing power loss of the group of retirees in 2022 and the rise of 2024 will do the same with the development of prices in the next year. That is, the final compensation that will be the “baguilla” overlaps with the height. And this should be as high as the average CPI in the previous year.

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