How high they rise, the “baguilla” and the new contribution to Social Security

The second part of the reform of the general pension system has not yet been approved, which is the most difficult and harmful to the payroll of future pensioners if the increase in the period of years contributing to the calculation of the pension is established definitively, and indeed already. 2023 There are many legislative developments presented by you social Security.

Main the changes Of the measures adopted at the end of 2021 in the first part of the reform. Pensions by law are linked to inflation, which will lead to significant increases in payment amounts in the context of escalating prices that could drag on in the coming years, the government abolishes the “baguilla” for retirees that are usually collected at the beginning of the year and the 20.4 million Social Security contributors will have to Pay new fees to the intergenerational justice mechanism.

Pensioners will receive an additional 107 euros

It is in public debate and in the street. Pensions from January 1, 2023 will increase by 8.5%. It will be the highest increase in history and the most expensive for the country: 17,000 million euros will be allocated just to modernize benefits based on the CPI and avoid the depletion of purchasing power due to the price spiral.

Taking into account the current average level of pensions offered by Social Security, retired They will charge on average €107 More per month, about an additional 1,500 euros for the whole of the next year. His average pension will remain at €1,364.

pensioners widowhood will charge 66 EUR On average per month, which means €928 for the entire next year. So that his average monthly pension is 846 euros since January.

Who gets a pension? orphan The monthly increase will be 41 EUR, until they accumulate a revaluation of €576 in the whole year. His monthly pension will be 525 euros on average.

Those who receive a pension from Social Security in family favor – Awarded to family members who lived with and were economically dependent on the deceased person and meet the required requirements, to protect the economic need resulting from the death – they will receive €54 per month, a total of 761 euros over the year. The pension amount remains at 694 euros per month.

separate case is New retirees. These charge an average of 20% more than annuities that come out of the system. On average, they have already exceeded 1,500 euros per month. Now, with the increase, these retirees will get €129 More per month, and a total of 1,806 euros per year. His pension will remain, on average, at 1,647 euros.

How do you know how much the pension will be increased in the coming years?

This historic increase of 8.5% projected for 2023 is the product of changes to the Social Security Act. Since this year, pensions have been linked by law to the consumer price index. So that the new rule for 2023 will be applied, which will be the same for the reassessment of 2024 and beyond.

Thus, the rise is calculated by the average CPI of Twelve months before November of the current year. That is, for the January 2023 increase, the twelve months before November 2022 – that is, from December 2021 to November 2022, are taken, 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.

Without being precise, the level of future increases can be approximated as major international organizations and economic forecasting houses have forecasts about CPI three years in advance. The government itself is working with these estimates, which, if met, could be a guide to the percentage of payments that will rise in the coming years. For example, according to estimates by the Bank of Spain, pensions It will rise 2.6% in 2024 and 1.8% more in 2025.

Why won’t the baguilla be charged (never again)?

From the previous legislative change in social security comes the fact that in Spain, unless there are new amendments, pensioners will never again get what is popularly known as “Baguela”. It is a single payment, received each year between January and February, as compensation. compensate what? It is the difference between the rise in the previous year and the average CPI recently recorded. A push to ensure the purchasing power of the 9 million retirees is preserved.

This is that Indexing of the consumer price index From the annuities with the above formula, which allows for approximate increases in the future, comes to correct the need to pay the “baguilla” to maintain the purchasing power of pensioners. Before the reform, the way pensions were adjusted according to the CPI was more random, volatile, and subject to uncertainty.

Rather than noting the average CPI for the previous year, it was raised in light of the CPI forecast for that year. So if public budgets are usually approved at the end of the year, the level of the CPI planned for the following year is included as a pension increase. A year later, the increase was subtracted from the average CPI at last. The difference The output determined the level of “baguilla” that was paid at the beginning of the year.

Now, when the increase is made on the basis of the inflation that occurred during the previous year, it is no longer Need to recalculate If his level matches the record already registered. The end of the baguilla.

New direct “tax” for pensions: 0.6% of salary

Another novelty that started to operate from January 2023 is the Intergenerational Equality Mechanism (MEI). Also approved at the end of 2021, it replaces the previous Sustainability Factor, which has not yet come into force despite approval. And that it assumes the adjustment of the initial amounts of pensions based on the average life expectancy from the moment of retirement of new pensioners. In conclusion, benefits are 20% lower at source than those currently offered by Social Security.

Now, the MEI that goes into effect creates an alternative to this programmed pension adjustment that carried the sustainability factor. But the alternative is not without question. Without going any further, by the European Commission. It is that this is reflected in the high contributions of all social security employees without exception. None of the 20.4 million workers will be exempt from paying these new fees. it will be from 0.6% of salary Regardless of its level. It will be paid out over the next ten years.

With this maneuver, the government hopes to enter what is known as ‘Pig’s bank’ From pensions a total of 22,200 million euros in the next decade, from this new deduction that Spanish workers will be able to raise from next year.

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