The revaluation of Social Security pensions is getting closer. At the same time, we know almost all the inflation data necessary to quantify the increase in these benefits. The experts of Research Group on Pensions and Social Protectionprofessors and researchers from the University of Valencia, Extremadura and the URJC, They anticipate an update of 3.8% so that pensioners do not lose purchasing power. In global terms, taking data from the entire system, the The cost to the Social Security coffers will be around 7.6 billion of euros.
The revaluation of pensions is one of the great milestones that the Minister of Inclusion, Social Security and Migration has recovered during the last legislature, José Luis Escrivá, which managed to shield purchasing power, shaped the evolution of inflation. He has also been a political pillar during the electoral campaign and the investiture process of the new president, Pedro Sánchez.
The Law 21/2021 establishes that “Social Security pensions, in their contributory form, including the amount of the minimum pension, will be revalued at the beginning of each year in the percentage equivalent to the average value of the interannual variation rates expressed as a percentage of the Index of Consumer Prices for the twelve months prior to December of the previous year.” Its application results in a revaluation of pensions for 2024 equal to the average interannual CPI from December 2022 to November 2023, both inclusive.
The known data from December 2022 to October 2023, to which a hypothesis is added in the month of November, with an estimated data of between 3% and 4.1% in the eleventh month of the year, results in a average CPI estimate of 3.8% which would be the reference index to update these benefits. This would lead to a disbursement of 7.6 billion in total, 1.9 billion for each point of price deviation.
Total disbursement of items
The application of this estimate for the revaluation of Social Security pensions in 2024 is quantified at 6,622 million euros, of which 564 million correspond to minimum pensions. These are revalued with the variation in average inflation in the last year, the aforementioned 3.8%.
If we add the Passive Class pensions, with 776 million and the non-contributory ones, with 248 million, the revaluation expense amounts to 7,647 million euros.
As stated in the latest pension reform, Minimum and non-contributory pensions will have greater protection: they will rise around 8%, that is, with the variation in the CPI plus an additional bonus. In the case of the minimum contributors with a dependent spouse over 65 years of age, in 2027 it cannot be lower than the poverty threshold calculated for a household of two adults.
The calculation has also been carried out in terms of Current Actuarial Value (VAA), that is, the impact of the 2024 revaluation in the long term. Thus, the true commitment that Social Security assumes when pensions are revalued, which amounts to more than 100,000 million euros.
“To this greater expense derived from updating the pension stock, we must add the additional expense generated by the greater number of pensions that enter the system and the substitution effect (understood as the difference between the average amount of the new pensions and those that cause loss), which also increases spending because the former are higher than the latter,” the researchers point out.
The scenario that has left the last pension reform compromised last March is the following: The greater expense will be assumed with more effort in social contributions. “This higher expenditure should be compared with the higher income expected from social contributions thanks to the evolution of nominal salaries (partly influenced by inflation), the number of affiliates and the measures to strengthen income of Royal Decree-Law 2/20233 , to assess the upward or downward evolution of the deficit of the contributory pension system,” states the study.