Government takes flak over proposal for new pension system reform

Labor unions and opposition parties have criticized the government for seeking to amend the state pension system to raise the minimum age for retirement before a reform by the previous administration has taken effect. The Spanish government promised the European Union that it would raise the retirement age as part of its cost-cutting drive.

The proposal has been put forward before the 2011 pension reform has gone into effect, establishing the early retirement age at 61 to 63 years of age. This earlier modification also raises the legal retirement age from 65 to 67 between 2013 and 2027.

“It is surprising that, even before (the previous reform) comes into effect and for its impact to be evaluated, they’re looking to open another debate,” leading labor union CCOO said Thursday. “It weakens the rights of wide sections of the population obliged to take early retirement because they have lost their job.”

Carmen López, the official responsible for social policy at the UGT labor union, also criticized the government’s proposal to bar public employees from taking early retirement.

Opposition Socialist Party spokeswoman Isabel López i Chamosa described the proposed reform as “madness.” She accused the ruling Popular Party of doing a U-turn on its position when it was in opposition. “They didn’t vote for the last reform because they didn’t accept raising the retirement age, and now they want to go even further,” she said.

The government’s report on the proposed reform does not come out with a specific new age, nor does it clarify when, exactly, working individuals might embrace partial retirement. The PP administration is also planning to increase the minimum period of time that workers must contribute to the Social Security System in order to be eligible for benefits, as well as the applicable reduction factors for early or partial retirees.

Pension reform was one of the conditions set by Brussels to give Spain a longer deadline to reach the deficit target of three percent of GDP.

“They are seeking to introduce a reform without the previous one having come into effect,” said Joan Coscubiela, spokesman for the Plural Left group. “This is not in response to the logic of the pension system but to the demands of the troika,” he said, referring to the EU, the European Central Bank and the International Monetary Fund.

Coscubiela said his political group is in favor of reforming the pension system provided this is carried out in an “equitable” manner.

The goal of both reforms — the one that has yet to go into effect and the one that has yet to be drafted — is to raise the real retirement age, which in 2011 was 63.5 years according to the government’s report, to which EL PAÍS has had access.

The 41-page proposal involves reforming access to both early retirement and partial retirement, by making requirements tougher and by ensuring that a worker who retires before the legal age will receive a lower pension, with a view to saving on Social Security spending. In its own words, “the goal of the present report is to introduce measures to support the sustainability of the system.”

The document shows that of all retirements in 2011 (198,600) slightly over half (50.6 percent) were early retirements. The average pension collected by the early retirees — 1,344.42 euros a month — was actually higher than the average benefits for people who retired at the legal age; 1,234.50 euros.

The new reform the government wants to put into effect in January contemplates four forms of early retirement, but there are two main ones, and these are the target of the government’s action. The first form of early retirement will allow a worker to go home at age 61 if he or she is affected by a mass labor adjustment plan or if the company shuts down. It will also be necessary to have been a contributor to Social Security for 33 years, up from the current 30 years.

The other form of early retirement will be at age 63, for people who have been paying Social Security for 33 or more years, and who voluntarily wish to stop working.

In both cases, reduction factors will be applied to the theoretical pension that the worker would be entitled to, had he or she waited until the legal age. These coefficients range from 1.625 percent to 1.875 percent on a quarterly basis, and dependant on the number of contributing years.

The government is also seeking to make partial retirement harder to access. Employment Minister Fátima Báñez explained last Friday that, according to her own conclusions, this form of retirement is not living up to its promise of partially retiring workers before the legal retirement age in order to replace them with younger workers. In this case, the minimum age for partial retirement would be 61, and the minimum contribution period to Social Security would be 25 years. Other requirements are added, such as extending the duration of the contract made out to the younger substitute.

There is a second report that aims to make it easier for new retirees to combine pension benefits with continuing work activity. The executive says that this has been a longstanding social demand, and that one possible incentive could be the elimination of the need to pay Social Security for individuals in this category.