During the last pension reform, the government provided an additional contribution that higher earners will pay to support pensions. This so-called “solidarity quota” aims to generate additional income for workers whose payroll exceeds the maximum base planned from 2025, currently located at 56,600 euros per year or 4,720.50 euros per month. The maximum contribution base limits the range of wages that pay social security contributions to Social Security, just as the maximum pension is also limited. The executive approved the evolution of the regulations in March this year to that all salaries pay contributions and the new quota will come into force in just a few months, tax workers with the highest payrolls from 0.92% to 1.17%.
The philosophy of the latest pension reform directs efforts towards higher incomes with virtually no reduction in expenses. In the specific case of the solidarity quota and the so-called “destope”, it is a question of closing a historical gap with Europe: Spain has a lower maximum contribution base (including salaries) than the other counterpart countries. There are workers who do not contribute for their entire salary, although they pay income tax for each tranche.
Unlike the Intergenerational Equity Mechanism (MEI), which applies to all salaries, the solidarity quota focuses on the highest payrolls. The solidarity contribution is a non-contributory but rather “redistributive” additional contribution. What does this mean? It is used to generate additional income which will be used to pay future pensions, but which they do not generate an improvement in the regulatory base which calculates the contributor’s future pension and could be considered a tax. In short: it will serve to soften the financial blow of mass retirements of the baby boom generation, but it will have no effect on the pensions of more than a million workers who will be affected by the regulations in Spain .
The new solidarity quota will be applied to the salary scale that exceeds the maximum base planned by mid-century. This limit is set on the basis of the variation in annual inflation increased by an additional 1.2 points after the last reform. According to forecasts from the Bank of Spain, the CPI will increase by 2.9% on average in 2024. Therefore, the increase that would be applied to the current maximum base is 4,720.50 euros per month or 56,646 per year. It would be 4.1% and would be around 4,747 euros per month or 58,968 per year. From this section, the supplement will be applied with the corresponding costs according to the section:
- An additional contribution of 0.92% for the part of the salary between the maximum base and 10% above this maximum base. In 2025, this first tranche will reach just under 65,000 euros.
- 1% for the salary scale going from the additional 10% of the maximum base to 50%. In 2025, this second tranche will be between nearly 65,000 euros and 88,000 euros.
- 1.17% for the remuneration bracket beyond the additional 50% of the maximum base. In 2025, salaries starting from 88,000 euros will be in this section.
The previous percentage will gradually increase each year, until reaching: in 2045:
- 5.5% on remuneration between the maximum contribution base and the amount 10% higher than the aforementioned maximum base, after an increase of 0.23 points per year.
- 6% on the part of the salary between the additional 10% of the maximum contribution base and 50%, after an increase of 0.25 per year.
- 7% on the part of the salary which exceeds the additional 50% of the maximum base, after growth of 0.29 points per year.
“The distribution of the type of solidarity contribution between the employer and the worker will keep the same proportion as the distribution of the type of contribution for common contingencies (i.e. the company’s contribution will be 5 times that of the worker). For example, in 2045, in the case of the second tranche (additional contribution of 6%), 5% will be paid by the company and 1% by the worker”, explains BBVA My Retirement.
The impact on each payroll with examples
More than a million workers will see the impact on their payroll at the end of the month. What the solidarity contribution will subtract from the payroll is from a few euros to several hundred.
Those in the lowest bracket and will pay 0.92% of their gross salary – so far exempt from fees – will pay 9.5 euros if the salary is 60,000 euros per year or 55.5 euros if the The example is calculated with a payroll of 65,000 euros.
Those who earn in the intermediate bracket will have their salary taxed at 1% for the pension fund and will pay an additional contribution of 160 euros or 260 euros, taking as an example salaries of 65,000 or 75,000 euros per year.
The highest salary percentile in Spain will pay 1.17% for their gross payroll. A salary of 100,000 euros will cover this percentage for a salary scale above 40,000 euros, for a total of 480 euros additional. A payroll of 125,000 euros will do this for a salary bracket of 66,000 euros which was previously exempt from contributions and which will now pay 772 euros annually.
This solidarity quota will be applied to workers with higher salaries, that is to say to employees who contribute to the general social security system. Also to salaried workers in the Seafarers’ Scheme and self-employed workers included in this Special Seafarers’ Scheme. All those who work as salaried workers.
However, self-employed workers are exempt from paying these fees and are also excluded from the Intergenerational Equity Mechanism (MEI). They now have a new contribution system based on real or net income which will increase their contributions every three years.
