The pension reform of 2021, more specifically of December 29, 202 was published Law 21/2021. Called “Guaranteeing the purchasing power of pensions and other measures to reinforce the financial and social sustainability of the public pension system”.
These measures are complementary to the pension update effective from the beginning of this year.
Below are the most significant changes introduced by the aforementioned Law, which came into force on January 1, 2022.
Pension reform of 2021
Let’s take a look at the measures in different fields, both concerning retirement and contributions.
Pension measures
Here we see a series of them affecting early retirement.
Voluntary early retirement measures
The reduction coefficients applicable by age to determine the amount of the early retirement pension are now monthly. Per month or fraction of month of anticipation. Until the publication of this Law, they were applied per quarter of anticipation.
What does this modification affect?
It will promote retirement at ages closer to the ordinary retirement age and will favor people with longer contribution careers.
The reduction coefficients will be applied to the amount of the pension resulting from applying to the regulatory base the percentage corresponding to the months of contribution. In the event that the regulatory base of the pension is higher than the limit established each year by the PGE Law (maximum pension amount), the reduction coefficients will be applied to the aforementioned maximum limit.
How does this modification affect in practice?
It will reduce the amount of the pension in cases where the regulatory bases are higher than the maximum limit established.
Measures regarding involuntary early retirement
The reduction coefficient applicable to the pension will also be calculated monthly (previously quarterly) per month or fraction of a month in advance.
What is the difference with the reduction coefficients applicable to cases of voluntary early retirement?
The reduction coefficients applicable to cases of involuntary early retirement are more beneficial than in cases of involuntary early retirement. Approximately 0.5% per year.
Elimination of the requirement that the termination must have occurred as a consequence of corporate restructuring that prevents the continuity of the employment relationship and all the causes for objective dismissal are recognized. Such as supervening ineptitude, lack of adaptation and lack of attendance of the employee. Until now only economic, technical, organizational and production causes were recognized.
Measures in the area of economic complement
For people who have taken early retirement between January 1 and December 31, 2021. New economic supplement, recognized ex officio as from January 1, 2022 and meeting certain requirements. For people who have involuntarily taken an early retirement pension a maximum of four years before reaching the ordinary retirement age. And for those persons who have taken a voluntary early retirement pension a maximum of two years before reaching the ordinary retirement age.
Measures regarding early retirement for reasons of activity
Revision of the general procedure for establishing age reduction coefficients. The establishment of coefficients reducing the retirement age will only proceed when it is not possible to modify the working conditions.
Measures regarding delayed retirement
Substitution of the single incentive. The interested party will be able to choose between three options, being a one-time choice. First, an additional 4% for each full year of delay in retirement. Also a lump sum. Finally, a combination of both of the above options.
Active retirement measures
A condition for access to this type of retirement is that at least one year must have elapsed since reaching the ordinary retirement age.
The incompatibility of access to active retirement in the case of termination of employment in the previous six months is eliminated. The obligation to maintain the level of employment is also eliminated.
Measures regarding forced retirement
To favor the extension of working life. The agreements may establish clauses that make it possible to terminate the employment contract upon reaching an age equal to or higher than 68 years of age.
Measures relating to contributions
There are also several cases here.
Contribution measures during temporary incapacity
Companies will be entitled to a 75% reduction in Social Security contributions for common contingencies during temporary disability for those workers who have reached the age of 62.
Contribution measures from retirement age onwards
Exemption of both companies and workers from paying contributions for common contingencies, except for TI derived from such contingencies, in the following cases.
In the first place, with respect to employees and worker or worker-members of cooperatives. Once these persons reach the age of access to the ordinary retirement pension (whether they are under permanent or temporary contracts).
Likewise, for self-employed persons who have reached the age of access to the ordinary retirement pension. They will be exempt from paying contributions, except for IT and professional contingencies, regardless of the years of contribution.
Other measures of the pension reform of 2021
This measures of the pension reform of 2021 also includes measures that affect specific groups.
Revaluation and guaranteed maintenance of the purchasing power of contributory pensions.
The mechanism that established the increase in contributory pensions based on the pension revaluation index has been repealed. Pensions will be revalued each year at a percentage equivalent to the CPI.
Intergenerational fairness mechanism
The sustainability factor in force until the entry into force of this Law has been repealed. New intergenerational equity mechanism with two application phases. The first phase will begin in 2023 and will consist of setting an additional contribution of 0.6% (0.5% to be paid by the company and 0.1% to be paid by the worker). Pending regulation of the second phase.
Modification of the regulation of the widow’s/widower’s pension for unmarried couples.
References to the economic requirements previously demanded are eliminated, in order to fully equalize them to the beneficiaries who got married.
Likewise, modifications are made in order to equalize the rights of unmarried couples to those of married persons.
Widow’s or widower’s pension for unmarried couples in exceptional cases
Recognition, effective January 1, 2022 and of an exceptional nature, of the right to a widow’s or widower’s pension when, after the death of one of the members of the couple on a date prior to January 1, 2022, certain circumstances concur.
Modification regarding the retirement of notaries, property, mercantile and real estate registrars.
The retirement due to age of the persons included in this group is compulsory. It will be decreed sufficiently in advance so that the cessation will effectively take place upon reaching the age of 70 years. However, after the age of 65, voluntary retirement may be chosen. In addition, they may request an extension of their active service until they reach 72 years of age at the latest.
