Changes to pension calculation method postponed

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In February 2003, the Spanish government proposed new social security legislation, which includes measure to preserve the national unity of the pensions system and prevent regional differences. However, it has postponed until 2004 debate on the controversial issue of changing the period of earnings used to calculate state retirement pensions. Commentators believe that this decision has been taken in the light of the current climate of public discontent over various issues and government unpopularity.

In February 2003, the centre-right People’s Party (Partido Popular, PP) government issued a draft law on 'specific measures' concerning the Ministry of Labour and Social Affairs' social security provision, which seeks to guarantee the unity, solidarity and equality of the social security system throughout Spain. This means that any public social security benefit that complements contributory and non-contributory benefit will fall under the social security system. The government is thus trying to counteract the tendencies of some regional governments (autonomous communities) to increase the amount of some types of benefit for political reasons. As the draft law states: 'Any public benefit that is aimed at complementing, extending or modifying the economic benefit provided by social security, forms part of the social security system subject to the principles regulated in Article 2 of the present law.'

The draft law also systematically reorganises child benefit and extends the benefit to adopted children, in line with the 'integral family support plan' (Plan Integral de Apoyo a la Familia), 2001-4. All child benefit will be systematically regulated by a single legal entity.

However, the most important point in the draft law is the postponement until 2004 of planned changes in the method of calculating pensions - changes in this area had been foreseen for 2003 by the national agreement on pensions signed in 2001 by the government, employers' organisations and the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO) (ES0106244F). It had been planned that the period of earnings on which the retirement pension is based should be increased from the present 15 years to 35 years, with the period increased gradually by one year per financial year until 2023. The effect would be a reduction in pension amounts - estimated at 12% on average by the Director General of Social Security and at 20% by the General Workers’ Confederation (Unión General de Trabajadores, UGT) and critics within CC.OO - despite the fact that 54% of pensioners earn less than the monthly minimum wage of EUR 450. Any new cut in pension entitlement would be added to the 10% lost as a consequence of the 1985 'Toledo pact' on social security reform (ES9710220F), which increased the period of earnings used in the calculation of pensions from two to 15 years - a process which has recently been concluded.

The context of the government's decision to postpone increasing the pension calculation period is one in which public protests and mobilisations on a number of issues are at levels seldom seen in Spain. After the one-day general strike in June 2002 (ES0207201N), tension has increased with widespread opposition to any war in Iraq (which the Spanish government supports) and criticism of the government’s management of the Prestige oil tanker disaster (ES0301101N). Major demonstrations on both issues were held in February.

Meanwhile, the trade unions and the government are attempting to keep the 'industrial peace'. On 30 January 2003, an 'interconfederal agreement for collective bargaining' in 2003 (Acuerdo Interconfederal para la Negociación Colectiva, ANC 2003) was signed by the main social partner organisations (ES0302204F) and a corresponding agreement has been reached for the public administration. The government has contributed to easing tensions with the repeal of much of its controversial reform of unemployment benefit (ES0212201N) and agricultural benefit (ES0302201N). There is also a debate on the future management of continuing training and the participation of trade unions in the system (ES0302103N).

However, there is still a perception that the social peace is threatened by the various current protest movements and adverse public opinion, and commentators believe that the government has postponed the reform of pensions in order to help maintain peace. Furthermore, with poor opinion poll ratings and a possible defeat looming in forthcoming municipal elections, the government is seen as trying to temper its current problems of legitimacy.

On pensions, CC.OO claims that the public system is in good health, whereas private pension funds are affected by the current economic downturn. UGT and critics within CC.OO are opposed to any modification of pension calculation of the type proposed by the government, which would lead to a cut in public pensions. The government feels that the proposed changes are the best — and fairest — way to ensure the financial health of the social security system in the long term. For the moment, however, both the leaders of CC.OO and the government feel that it is better to postpone discussion of this subject.