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Lucía Palacios
Madrid
Monday, 21 October 2024, 16:03
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Pensions in Spain will experience a much more moderate rise in January than in the two previous years. Although the final reckoning is still two months away, they will generally rise by less than 3% in 2025, between 2.7% and 2.8%, according to estimates made for this newspaper by the number-crunchers at Fundación de las Cajas de Ahorros (Funcas).
This is the lowest increase since 2022. Moreover, it is almost a third of the 8.5% that was awarded in 2023 and one point below this year's increase (3.8%). The blame for this lies with 'disinflation'. The de-escalation of inflation in recent months, which is finally below the desired 2% (in September it fell to 1.5%), will have an impact on the more than 9.2 million pensioners in receipt of a Spanish pension because their payments are directly linked to prices.
Since 2022 contributory pensions have automatically risen in line with the average inflation figure for the last 12 months (December to November) without the need for the current government to approve the new increase. This was agreed in the last pension reform designed by the then minister José Luis Escrivá with the aim of providing security for the elderly and safeguarding their purchasing power.
Average inflation from December to September stood at 2.94%, but the figure for the next two months is not yet available to know with certainty how much pension payments will rise (it will be officially announced on 13 December), but it will almost certainly be below 3% since inflation in this final stretch of the year will continue to level off according to the forecasts from the main economy watchers and experts.
If pensions are finally set at the 2.8% increase as estimated by Funcas, the average pension in the system will increase by 35 euros monthly in January (almost 500 euros total in 2025), which will increase the average benefit from the pensions system to close to 1,300 euros per month, a barrier that has never been exceeded until now and which will happen next year. The more than 6.4 million pensioners, who will see their paychecks rise by 45 euros each month to around 1,650 euros (those who come from Spain's general pensions scheme), will have a little more each month. They will thus have an extra 630 euros next year that will allow them not to lose purchasing power, the major commitment set out in the pension reform.
The self-employed, however, will have to settle for an increase of only 27 euros per month, receiving 992 euros, 650 euros less than salaried workers. For their part, widows' pensions will increase by an average of 25 euros to 922 euros (they have never before exceeded the 900 euro mark). There will be a slightly larger increase in benefits paid to anyone with a permanent disability, 32 euros extra per month to almost 1,200 euros, while the orphan's pension will rise by 14 euros to 516 euros per month and that for family members will increase from 743 euros to 764 euros, 21 euros more.
There will still be one subgroup of pensioners who will receive a payment increase of considerably more than 2.8%. These are those who receive minimum and non-contributory benefits, a total of 2.6 million people, whose salaries will rise well above the CPI (consumer price index), as this was approved in the pension reform to improve the economic conditions of this most vulnerable group and guarantee them an income more in line with the cost of living. Thus, specific increases have been approved for these benefits as of this year with the aim of linking them to the poverty thresholds as of 2027. Thus, in 2025 the minimum retirement pension with a dependent spouse will be adjusted to reduce the gap with the poverty threshold for a household with two adults by 30%. The same will apply to the minimum amount of the widow's/widower's pension with family responsibilities and contributory pensions with a dependent spouse,
Non-contributory pensions will see a similar increase so that, on 1 January 2025, the difference with respect to 75% of the poverty threshold for a single person household will be reduced by 30%.
What will be raised more for the first time will be the system's maximum pension, which will be boosted by an additional 0.115 percentage points from 2025 to try to compensate for the higher burden on some workers of the increase in their contributions, which will be subject to another surcharge in January.
Although pensions will rise by 2.8% across the board, the increase in the system's expenditure will almost double. The budget for this item will increase by between nine and twelve billion euros in 2025. Funcas estimates a rise of 5.1%, which would mean between nine and 9.500 billion more, while the economic think tank Fedea puts it at 12 billion (5.7%).
This higher increase is due, in addition to the additional revaluation of minimum and non-contributory pensions, to the fact that the number of pensioners will also grow by around 1.1% per year and their benefits will be more generous than those who are now dying because they had better final salaries upon retirement, which is something else to bear in mind.
"Both the ageing of the population and the revaluation entail an increase in the pension bill", is the warning from Raymond Torres, director in charge of monitoring the economy at think-tank Funcas. In his opinion, the two elements that were approved in the pension reform to counteract this higher expenditure - the delay in the effective retirement age and the increase in social security contributions, as well as the arrival of immigrants who also pay contributions - will not be enough to balance the system and "additional measures will be needed" that will have to be taken next year, when it is time to reassess the pension reform and also when the safeguard clause comes into effect.
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