Although Spain is often considered a country with generous pension payments, it is not generally known that it is one of the few states in Europe where retirement pensions are capped. At present pensioners can receive no more than 2,819 euros a month from Social Security, although this will increase to 3,059 euros a month from next year.
Elsewhere this is not the case. Germany, Italy, Sweden, Portugal and Denmark do not impose any limit on the maximum monthly payment, and in Luxembourg and Greece, which do, it is much higher at 9,192 euros and 4,606 euros a month respectively. This means that the highest pension payment in Spain is about 40% lower than in Greece, a less-developed country.
To receive the highest pension payment in Spain someone must have paid in for 37 years and six months, and this will gradually increase to 38 years and six months in 2027. Social Security minister José Luis Escrivá is also preparing a reform to the pension system which will make it harder to achieve maximum pension.
Workers on high salaries will be those who lose out most under the potential reforms to the Social Security system. Those who earn more than 54,000 euros a year (which is about 2,700 euros net a month) will end up paying the highest contributions over the next decades. The change will be introduced gradually until at least 2050 and will lead to an even bigger gap between the amount they pay in and how much they receive when they retire.
In fact, from 2023 until at least 2032 all Social Security contributions will increase by 0.6% due to a new mechanism of intergenerational equity which comes into force in January to refill the reserve pensión fund top ay retirement pensions of the so-called baby boomers.
This means that those on the highest incomes will see three increases in the amount they pay out in years to come: an increase in line with inflation, an extra 1.154% per year under the reforms which are currently being negotiated and a further 0.6% for this new mechanism.