Council of Ministers

The Government of Spain approves the reform of the public pension system and guarantees purchasing power

Council of Ministers - 2023.3.16

Moncloa Palace, Madrid

The Council of Ministers has approved the Royal Decree-Law on Urgent Measures for the Extension of Pensioners' Rights, the Reduction of the Gender Gap and the Establishment of a New Framework for the Sustainability of the Public Pension System.

The text is the outcome of an agreement with the trade unions UGT and Comisiones Obreras, takes up recommendations contained in the 2020 Toledo Pact and is part of Component 30 of the Recovery, Transformation and Resilience Plan.

The Minister for Inclusion and Social Security, José Luis Escrivá, has stated that the regulation safeguards the purchasing power of current and future pensioners. In the president's words, the government is conveying to the 11 million pensioners that their pensions are not only guaranteed and will maintain their purchasing power in 2023, but that there is "an extraordinarily robust framework of sustainability".

Escrivá said that the reform introduces equity and sustainability into the system, and improves both the situation of people with irregular careers, and non-contributory and minimum pensions. It also reduces the gender gap in pensions and introduces an intergenerational equity mechanism that will benefit future pensioners.

Revenue enhancement

Pool Moncloa/Borja Puig de la Bellacasa

Social security revenues are being strengthened by gradually increasing the maximum bases and maximum pensions. A solidarity quota has also been created, which will be phased in progressively for the highest salaries, starting at a quota of 1% in 2025, and increasing by 0.25 percentage points per year to reach 6% in 2045.

The Intergenerational Equity Facility will be strengthened to 1.2 percentage points in 2029. José Luis Escrivá argued that this mechanism replaces the one established in the 2013 reform, which meant that pensioners could lose up to 30% of their purchasing power over the course of their lives.

A dual counting period system has also been established for the next 20 years. Retiring workers will be able to choose being computing 29 years of their professional careers, discarding the two years when they made the least contributions, or to continue with the last 25 years of their working lives, as at present.

The minister pointed out that this decision will particularly favour vulnerable people, who have bigger gaps in their careers, and those who are young now, because they will get a larger pension.

Reducing the gender gap

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José Luis Escrivá emphasised that the gap supplement will be raised in the next two years by an additional 10% in line with the Consumer Price Index. Women with contribution gaps will have better coverage, with up to five gap years covered at 100% of the minimum base, as opposed to the current four. The sixth and seventh years without having made any contributions will be covered by 80% of the minimum base, as opposed to the current 50%.

Regarding the lowest minimum and non-contributory pensions, the minister highlighted that they will rise above the rest over the next four years, i.e. above the Consumer Price Index, which is the benchmark for revaluation.

Furthermore, students who carry out training and academic internships included in training programmes will be included in the social security system.

This reform is affordable for the economic system

In the opinion of the head of Inclusion and Social Security, the reform is "perfectly acceptable" for the economic system, and "in no case does it call into question the competitiveness of Spanish companies".

Escrivá added that "it is a modest adjustment because the system is already quite solid and only needs a little more strengthening". It is "a small effort", which does not change the situation and the labour cost profile of our companies in relation to our main consumers, and which "in no way jeopardises the extraordinarily good functioning of the labour market".

In this context, the minister referred to the seasonally adjusted employment data published today, which he described as "absolutely historic".

For her part, the Minister for Territorial Policy and Government Spokesperson, Isabel Rodríguez, said that with the new framework for the sustainability of the public pension system the government has completed the reform and has fulfilled its commitments to citizens and to Brussels.

She also thanked the trade unions and most of the parliamentary groups for supporting a text that guarantees the dignity of pensions.

Modernisation of public administrations

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The Government has agreed to submit to parliament, by urgent procedure, the draft Civil Service Law, a key piece of legislation for reforming public administrations and modernising public services.

Isabel Rodríguez stated that the future law is another of the milestones of the Recovery Plan, and will modernise and improve the organisation of the State Public Administration. It develops the most important aspects of the 2007 Basic Statute for Public Employees and is also the outcome of social dialogue, negotiation and agreement with the trade unions.

Among the main challenges of the reform, the spokesperson indicated that it strengthens the leadership of the public administration, contributes to achieving higher quality public services, and configures a new, more professionalised public employment model, oriented towards citizen service.

The model, which was presented to the Council of Ministers on 20 December, is based on results-oriented competency-based management. It strengthens the training of public employees and evaluates and rewards performance.

The minister explained that the regulation is committed to strategic human resources planning, adapting personnel selection to the needs of the organisation. It also makes careers more dynamic to favour professional development, provides for a horizontal career path and encourages internal promotion.

The spokesperson added that the public employment offers will incorporate at least 30% of the positions for internal promotion and increase the number of positions reserved for people with disabilities by up to 10%.

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