The second pension reform will reduce the salary of workers


The second pension reform, captained by Jose Luis Escriva, will bring with it important news for the payroll of millions of workers in Spain. Specifically, it will do so between now and 2032. The reason is none other than the increase in Intergenerational Equity Mechanismwhich would go from the current 0.6 percentage points to 1.2% points in 2029at a rate of one tenth increase per year to reinforce the system in years when there may be greater stress due to the retirement of the baby boom generation.

The already known as ‘pension tax’ came into force in 2023 and will remain in force for the next nine years. It is, therefore, an additional contribution made each month by both salaried employees and the self-employed to guarantee the piggy bank of contributory pensions in the coming years. Specifically, according to the calculations stipulated by the Government of Spain, this new mechanism is expected to increase the Social Security Reserve Fund by 22,000 million euros.

How is the MEI applied to guarantee pensions?

To better understand how the Intergenerational Equity Mechanism works, which replaces the sustainability factor approved in 2013, it is best to see a specific example. For this year the contribution will be 0.6% of the contribution for common contingencies, divided between the company and the employee. 0.1% is paid by the worker, while 0.5% is paid by the company. For example, in the case of a salary of 1,500 euros gross per month, the MEI would mean a monthly contribution of 9 euros: the employee would pay 0.90 euros and the company, 8.1.

Will my net salary go down due to the MEI?

Yes, although the amount applied will depend on each person’s payroll. However, the truth is that the greatest burden of the tax falls on the entrepreneur or the self-employed person, who in 2023 assumes 0.5%, while the worker will lose 0.1% of his net salary to be received.

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