Spain has joined the majority of OECD countries that protect pensioners against inflation

Inflation has been a challenge for the world’s economies in recent years, but the vast majority of OECD countries, the so-called “Club of rich countries”, “fully protects pensioners from the evolution of inflation”. Prices over time, the organization emphasizes. In a report released Wednesday. They were recently joined by Spain, following the repeal of the 2013 PP legislation and the approval of a new pension reform in the last legislature, which once again linked the annual revaluation of benefits to prices (CPI).

The OECD released its usual survey this Wednesday Pensions at a glance (Pensions at a glance), this time corresponds to 2023. Due to the large increase in prices from 2021, the report pays special attention to this issue, highlighting that “more than half of the OECD countries fully protect pensioners against the evolution of inflation over time.”

In most of these countries, pensions are indexed to prices, as in Spain since the last reform, to prices plus real wage growth (if positive) or to the highest prices or wages. Several other countries index pensions to a combination of prices and wages, or entirely to wages, the study said.

Although wage growth has often outstripped prices, indexing pensions to inflation in this exceptional episode was more favorable to pensioners. Likewise, it was “more expensive than originally expected for public finances or pension providers in general,” the OECD stressed.

The international organization believes that the consistent application of indexation rules is “necessary to build confidence in pensions”, but also warns that protecting pensioners “has proved costly”. For this reason, he believes that “in exceptional times” it may be fair for high-income retirees to share some of the costs of inflation with the rest of the working-age population by reducing the revaluation of their benefits. .

Pension reform in Spain

The organization analyzes the various elements of the recent pension reform in Spain, which ended with the second phase approved this year. From the above indexation of pensions to prices, as well as the elimination of the sustainability factor approved by the PP in 2013, the improvement of the lowest pensions and gaps for women’s care and the increase in system income thanks to the increase. Social contributions, especially for high-wage workers.

Using AIReF data, it is estimated that the reform will lead to an increase in pension costs, which will only be “partially” offset by the proposed income measures. In particular, the report includes a calculation by the Independent Body for Fiscal Responsibility, which estimates that these measures, together with self-employment tax reform, would generate an annual increase of 1.3% of GDP in 2050.

The OECD indicates that “a sharp increase in the maximum contribution base, together with a limited increase in the maximum pension, will help finance the increase in spending”, but believes that this will not cover all of this increase.

“Additional revenue only partially covers rising costs,” where it stands out “mainly through the re-introduction of price indexation.” Thus, it includes the AIReF calculation, which assumes that annual spending will increase by 2.4% of GDP, “resulting in a projected increase in the deficit of 1.1% of GDP in 2050.”

Source: El Diario

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