"We have not talked about pensions." The general secretary of UGT, Pepe Álvarez, did not want to assess last Monday if between the extraordinary measures that the Government will propose to social agents to tackle the economic consequences of the War in Ukraine are pensions. The reform of the system by which benefits are revalued with the CPI barely two months earned and the outbreak of the crisis already forces to calculate their costs for the sustainability of social security accounts.
Apparently, José Luis Escrivá, Minister of Social Security did not include a report on the impact on the impact of the crisis in the main heading of the State: 171,772 million euros of which 157,564 million correspond to contributory benefits.
But the escalation of inflation to levels of 7% in recent months and the forecasts for economic affairs that the rest of the year will be maintained at that high or even higher injects a strong pressure on the system. With inflation that organisms as foreseen functions may be 6% during 2022, the revaluation of contributory pensions for about ten million beneficiaries would shoot spending at 9,453 million euros.
Since last December and in accordance with the reform approved by Congress with the consensus of social agents, pensions are revalued based on the average of the IPC's interannual variation rates of the twelve months prior to December. Exercise 2022 is a year of transition, when applying with the new formula an increase of 2.5% corresponding to the current year plus the warranty of revaluation of the previous system due to the difference between final inflation (2.5%) and the Increase decreed for pensions at the beginning of 2021, which was 0.9%. In total, the invoice for the revaluation of contributory pensions has amounted to about 5,900 million euros to which 700 million euros should be added to the specific passive classes scheme for officials.
At the end of this year, this amount will be far below that marks the law for 2023. The revaluation of pensions will be maintained, from afar as the main factor that drives system spending, well above the increase in the number of pensioners or the effect that produces replacement of lows through high performance.
"In the short term, it is difficult for the increase in expenditure that a law just premiered", says Rafael Doménech, responsible for economic analysis by BBVA Research. "Although it would be nice for a transparency exercise to underline this effort," he kills him. Doménech indicates that inflation was already very high before the explosion of the war in Ukraine that has finished shooting prices. Each extra point on the IPC will suppose about 1,500 million euros of extra spending for the pension system.
The system will not have more remedy to absorb an expense that will be consolidated for all current and future pensioners until a cost of 120,000 million euros in actuarial terms. The basic tool for balancing it in the short term are the contributions, which this year will amount to 137,000 million euros, 20,000 million below expenditure in contributory pensions, according to the general budgets of the State.
"The quotes can not increase the rhythm of prices precisely because they are linked to wages and if something has to be avoided is that salaries grow at the rate of prices to avoid second round effects," says Doménech.
So things, the one who promised to be the first year of adjustment of the pension system thanks to the first round of reforms negotiated by the government will be far from offering the expected results. "The contributory deficit will end 2021 at 25,000 million euros and the revaluation that establishes the reform will not help the one who comes," adds Enrique Devesa, a financial and actuarial financial economy teacher of the Valencia University and Pensions Specialist. Devesa is skeptical about the government's reaction capacity to cushion the impact of the reform on the pension system. "Next year is an election year: there is no party that dares to play pensions."
Date Of Update: 09 March 2022, 09:22
