The new contribution you will already notice in your payroll that will revive the pension ‘piggy bank’
the Mechanism for Intergenerational Equity (MEI)which replaced the sustainability factor approved by PP in 2013, would be an additional cost that would mean 0.6% of workers’ salaries.
MEI is designed to raise an amount of money high enough to help Social Security cover all pension expenses when baby boomers begin to retire.
What is this new tax?
MEI is a new fee paid by all workers, without exception and regardless of salary level. Specifically, it is applied in the form of a new contribution and will be 0.6% of the salary. The new fee will appear on employee payroll and will also be charged to self-employed.
How much is this tax
It means 0.6%, of which the employer pays 0.5%, and the worker pays 0.1%. The main unions estimate that this new tax will mean an average of €5 for the self-employed. For example, for employees with a gross salary of 2,000 euros per month, it would be a fee of 12 euros, the employee would pay two and 10 would be paid by the company. This amount may vary depending on the payroll level, but not the percentage that will be applied.
How long will she be held accountable?
The MEI tax will be imposed for 10 years, from 2023 to 2032, and is the first direct “tax” in Spain for the payment of pensions. The government may not use these surcharges for anything other than covering the cost of pensions.
What happens if you don’t collect enough MEI?
The government estimates that €22,000 million will be collected, less than half of what was initially expected. However, if the MEI is ultimately not sufficient and the social security deficit is maintained, another path should be considered in a consensual manner between government, political parties and social agents.
It should be borne in mind that these 22,000 million are equivalent to two additional payments to pensioners over the year. Or in regular installments for two months.
The two paths that will remain if the deficit is not reached will be: reducing the proportion of pension spending, that is, reducing benefits, or raising the deductible salary by 0.6%.
