Employment calculates that Spain must grow 30 years to 4.2% in order to always raise pensions with the CPI ~ Career Malls

Friday 13 April 2018

Employment calculates that Spain must grow 30 years to 4.2% in order to always raise pensions with the CPI

A report estimates that a record economic growth is necessary to revalue without triggering the spending - jobs 2018

Addressing one of the demands of the growing mobilization of pensioners and future retirees in the Spanish streets requires with the current pension system a great effort as a country and break records of growth of the economy.

According to a confidential estimate of the general Directorate of Social Security of the Ministry of Employment to which EL MUNDO has had access, the Gross Domestic Product (GDP) of Spain should grow by 4.2% on an annual average until 2050 in order to raise pensions as inflation without excessive triggering of system spending. Hence the need to reform the system.

The Spanish economy is currently growing at a rate of 3%, which would not be enough to prevent pensioners from losing purchasing power without further decontrolling the system's spending. The calculation assumes that maintaining the current nominal growth of 3% and aiming at the same time to raise pensions by around 1.8%, which is the average inflation forecast by the European Central Bank, would raise pension spending by 52%. It would go from the current 11.7% with respect to GDP, to 17.84%.

This would require an increase of more than 70,000 million euros per year in revenue through increased taxes or social contributions from the next decade. For the cost of the system to be similar to the current one (see attached graph), the economy should grow at the aforementioned nominal rate of 4.2% -2.4% real considering inflation-, unless reform measures are taken. contain the expense.

Although it has not transpired so far, the calculation to which this newspaper has had access was delivered months ago by the General Director of Social Security Management, Miguel Ángel García, to the Toledo Pact Commission that is working on that scenario, between others, according to parliamentary sources. Official sources of the Ministry of Employment point out that the Department's top officials do not contribute to this commission as a government , but as experts and trying to offer answers to the scenarios for which the deputies ask. One of the requests is, precisely, to evaluate the cost of revaluing pensions according to inflation.

In the case of the aforementioned document, the general director of the Ministry presented a simulation of the evolution of expenditure with respect to GDP from now until the year 2050 and taking into account that the number of pensioners will be 50% higher in that year than the 9.5 million current. Also estimating that the so-called substitution effect, -difference between new pensions and those that cause a fall in the system- remains constant at the current level.

Without going into figures, the Minister of Employment, Fátima Báñez , has made several public statements assuring that the system is "sustainable and viable", but that the most effective formula for this is "growth and job creation" .

Experts believe that one of the measures already taken, the so-called Pension Revaluation Index (IRP) introduced in the 2013 reform is the most powerful savings to try to correct the imbalance of Social Security . According to this modification, in a deficit situation like the current one and like the one foreseen for the future, pensions will only be able to increase by 0.25%. "Savings in 2018 alone can be 1,800 million, applying 0.25% instead of the CPI of 1.67% in November of last year, which led to more than 11,000 million savings in 2022. In 2027, Saving would reach up to 1.7 points of GDP, "says Eduardo Bandrés, director of Public Economics and Welfare at Funcas.

In return, it threatens to unleash a loss of purchasing power of up to 20 points for pensioners in the next 10 years , according to Bandrés. In 2017, pensions rose by 0.25% and average inflation was 2%. Only until 2022 this expert foresees an impoverishment of nine points.