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Fedea proposes partial indexation of pensions on the CPI to ensure the sustainability of the system

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Fedea proposes partial indexation of pensions on the CPI to ensure the sustainability of the system

The Foundation for Applied Economic Studies (Fedea) proposes partial indexation of pensions to inflation, so that the highest pensions, but not the lowest, which cannot be reduced, are partly “sacrificed” to the years of loss of purchasing power. this helps reduce pension costs and ensure the sustainability of the system.

This is one of the measures that the executive director of Fedea, Ángel De la Fuente, defended during the inaugural conference of the National Congress of Economists and Auditors held this Thursday in Madrid, once it became known that the inflation causes a revaluation of pensions. 2.8% in 2025.

For De la Fuente, this system recovered with the latest pension reform “goes in the wrong direction”, because it dangerously brings the average pension closer to the average salary and in the case of the new average pensions of the general system, they are even placed at- above the average salary. “When retirees earn more than workers, it’s dangerous”he warned.

However, the director of Fedea does not believe that the pension system “will go bankrupt”“, but there is a risk that a lot of money will end up being allocated from state accounts to fill the gap that exists between income from social security contributions and expenditure on these benefits, leading to a loss of future investments or neglecting other investments like education.

“Each salaried worker must contribute 2,500 euros to cover or fill the social security deficit, etc. It’s a lot of money and it will be more in the future”the expert warned

De la Fuente pointed out that the Spanish pension system is much more “generous” than that of surrounding areas, since the pension in Spain represents almost 80% of the salary of an active worker, while in countries like Germany, it reaches 45%. %, although he clarified that the fact that salaries in Spain are lower than those in Germany plays an important role here, which also affects the amount of the pension.

Find life expectancy

In the same spirit, another of the proposals put forward by the Fedea expert consists of indexing the retirement age on life expectancy, an indicator that was part of the PP reform in 2013 and which has never been used. “If we live longer and longer, we will have to work more,” he reflects.

In the same way, De la Fuente advocated eliminating the possibility offered by the current pension system of eliminating the worst months of working life to calculate the pension, with the aim of reusing the entire working life, and regaining the idea of ​​controlling growth. pension costs, both for current and future retirees, as well as the move towards a Swedish-style pension system or notional accounts.

More state resources

The expert, however, recognized that additional state resources will have to be allocated until 2050, that is to say the years when the “baby boom” generation will enter the retirement system, but he requested that it be “fair and as transparent as possible”. “.

In this sense, he proposed that the injection of this financing to pay future pensions comes from a surcharge on the state personal income tax rate, which is the fairest tax of the Spanish tax system because “we all pay it”.

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