Recently, we recently discussed in the office a great article in the Expansión Newspaper, which detailed the current situation of Social Security, and summarised the economic proposals existing policies that seek to achieve sustainability in the pension system Spanish. Let us list them and draw some conclusions.
The retirement of the baby-boom generation«
In the news, in blogs, on the street... everyone is talking and worrying about what the pensions of the future will be like. Today's pensions seem to be guaranteed. However, those of the generation of “baby boom” Why is this the case? Quite simply:
- because their salaries have been and are higher than those of their predecessors, so their pensions should be as well,
- because they are a very large generation. With their retirement, we would go from having a good number of contributors to the Social Security (filling the pension fund) to having to pay all that volume of pensions, with pensions lasting longer, given that life expectancy continues to grow.
Possible solutions to the pension problem
Now the million-dollar question, ¿how this imbalance can be addressed we are predicting? Let's look at the proposals under discussion:
Funding
To be able to finance certain pensions (orphan's and widow's and widower's pensions) through taxes, This means that the social security system does not have to bear the costs. We are talking about €24 billion per year.
Corrective factors
Seek sustainability through the introduction of corrective factors, which introduce life expectancy into the formula. This is already related to the limitation in the revaluation of pensions, preventing it from being equal to the CPI, but rather to a minimum of 0.25% and a maximum of 0.5%.
Continuity in the labour market
Compatibility The combination of receiving a pension and remaining in the labour market, which is not possible at present, is already a reality. This is already a reality today.
Limiting early retirement
A practice that outrages many people because of the high cost to the social security system.
Promotion of private savings plans: improvement in the tax treatment to provide more incentives for families to save, seeking to encourage more money in retirement.
As we can see, some measures could be considered a mere sharing of the cost between public institutions (as the first one could be), or a simple cut in pensions (the second one, which we talked about in our article of a few months ago). «The uninformed lie of pensions and social security».»). On the other hand, the other alternatives under consideration seem to us to be very favourable to try to improve the situation we find ourselves in.
If you want to assess how much you need to save to have a certain amount at retirement, Contact us. Our Savings and Investment Department will help you to achieve this.
