The new Social Security law establishes that all pensions will have to be revalued each year with the average inflation of the previous year. With a CPI that will be around 8% this year, complying with the legal precept next year will mean an increase in spending of some 12,000 million euros, taking into account that the forecast is that the payment of almost 10 million contributory pensions This year it will cost Social Security some 151,000 million euros.
However, given the wide range between the maximum contributory pension and the minimum, the cost of raising one and the other by 8% has a very different effect on the Social Security coffers.
Thus, according to the calculations made by eE, revaluing the lowest million pensions –they charge an average of 269 euros per month, 3,762 euros per year– will mean an extra cost of 300 million euros; however, raising that same 8% to the highest pension million – average of 2,665 euros per month, 37,315 euros per year – will cost the Social Security coffers almost 3,000 million (2,967 million).
2.5%, compared to 24.6%
Or put another way, the 10% of the lowest pensions will be responsible for 2.5% of the 12,000 million increase in spending, while the 10% of the highest will eat 24.6% of the extra cost of 2023 .
If instead of dividing pensions by deciles, it is done by quarters, the impact is even greater. The 25% of the highest pensions would take almost half of the 12,000 million increase, 5,920 million according to the calculations of eE. Some figures that coincide with those published on Twitter by the economist Juan F. Jimeno, who calculates that the revaluation of pensions of less than 9,500 euros per year, which represent 32% of the total, will have a cost of 1,600 million -13.4 % of total cost–; those who are between 9,500 and 11,550 euros a year, 18% of the total, eat 1,550 million –12.9% of the total–; pensions between 11,550 and 18,900 euros per year, 25% of the total, will cost 2,925 million euros –24.4%– and, finally, pensions that exceed 18,900 euros per year, which are the remaining 25%, would cost 5,900 million euros, 49.2% of the 12,000 million.
Enrique Devesa
These figures also coincide with Enrique Devesa, one of the leading experts on pensions in Spain and a professor at the University of Valencia, who explains to eE that according to his calculations, 25% of the highest pensions correspond to 48.7 % of the cost of the revaluation and if they take 50% of the highest pensions, 73.3% of the cost corresponds to them.
“The 25% of the lowest pensions only correspond to 9.8%”
Therefore, he concludes, “26.7% of the cost corresponds to the lowest 50% of the pensions and only 9.8% of the total revaluation cost corresponds to the lowest 25% of the pensions”.
About 17,000 total impact
However, the cost that Social Security will have to face when revaluing pensions by 8% exceeds 17,000 million euros. To the 12,000 million that the revaluation of contributory pensions supposes, we must add the impact on the pensions of public workers (passive classes) that will suppose another 1,500 million.
And, finally, we must take into account the slippage caused by the increase in the number of pensions in 2023 and the increase in the average cost of the pension, which is calculated at another 2.5% of the 151,000 million spent in 2022: another 3,500 million .
Impact by deciles
In the work of this newspaper, the impact of raising 8% to each million pensions included in the ten deciles organized from the lowest to the highest is clear.
Thus, the first million pensions will have an extra cost of 300 million (2.5% of the total), the second 533 million (4.4%), the third 717 million (5.9%), the fourth million will cost 792 million (6.6%), the fifth, 861 million (7.1%), the sixth 1,002 million (8.3%), the seventh decile 1,245 million euros (10.3); the eighth 1,245 million (13%) the ninth 2,093 million (17.3%) and the last, the most expensive million pensions, will cost to raise them by 8% 2,967 million euros (24.6% of the total extra cost of 12,000 millions of euros).
X-ray of pensions
In the month of July, Social Security paid 9.95 million pensions that were received by just over 9 million people, since it is common for more than one pension to be received.
Of the total of 9.95 million, 952,409 were permanent disability, representing 9.6% of the total. Retirement pensions are the largest item, 6.25 million pensions that add up to 63% of the total. The second largest item is the 2.35 million widow’s pensions, 23.7% of the total, and to a lesser extent, 342,264 orphans were paid, 3.4%, and 44,420 in favor of relatives, 0, 5%.
According to the data provided by the Social Security, the average pension for July was 1,090 euros (in the calculation made by the eE, it comes out somewhat lower due to the calculation adjustments, 1,085 euros). The average retirement pension was 1,255 euros, which in the General regime rises to 1,403 euros, self-employed 835 euros, Coal Mining 2,446 and Sea Regime, 1,393 euros.
staggered climbs
Numerous economists, supported by the Bank of Spain, have launched a debate on the networks about the need to make staggered increases to reduce the impact of raising 8% equally to the 10 million pensions that are paid each month. There are various proposals.
Recently, the economist Ángel Martínez suggested raising 8% to deciles from 1 to 3, 6% from 4 to 6, 4% to 7 to 9, and only 2% to the last decile. With that, 40% would be saved, and the cost would be reduced from 12,000 to 6,800 million.
Those who oppose a staggered increase, argue that it breaks the contribution. Those who charge more, have also quoted more.
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