Unions back pension reform as CEOE votes no, decree to govern the change
The forthcoming phase of the pension reform is moving toward approval this Thursday by the Extraordinary Council of Ministers. It outlines a second phase that raises the maximum base for contributions and enhances minimum pensions. It also introduces a dual model for calculating pension entitlements, giving workers a choice between the last 25 years or the final 29 years of contributions, with the two smallest years being discarded in the latter option. The plan aims to modernize how pensions are calculated while providing clearer paths for retirement planning.
The reform, agreed with major labor unions and rejected by the leading business association, is set to be formalized as a Royal Decree. This occurs even as José Luis Escrivá, the Minister for Inclusion, Social Security and Immigration, prepares to inaugurate his term. The process remains open for parliamentary groups in Congress to negotiate potential changes before the decree becomes law.
Unions endorse the reform; CEOE stands in opposition
Early on Wednesday, the minister formalized the agreement on implementing the reform with the leaders of the CCOO and UGT, Unai Sordo and Pepe Álvarez, in a session that also involved briefings to the European Commission. The formal explanation of the plan was staged for the afternoon, with the Toledo Agreement referenced as a framework for the reform’s details.
Ministry estimates place the financial impact of the reform at a notable redistribution of future retirement benefits. For workers currently at 25, retirement would see an increase of roughly 20,000 euros over the course of their retirement. For those who will retire in 2027, the improvement is projected to be around 5,000 euros. These figures reflect the intended uplift in pension amounts as the reform takes effect over time.
According to the department led by Escrivá, the reform, which enjoys the backing of Brussels and Unidas Podemos, is expected to deliver a substantial pension increase. A significant portion of this rise results from the gradual adjustment planned through the Intergenerational Equity Mechanism (MEI). The MEI would climb from 0.6% to 1.2% by 2029, a step designed to preserve the sustainability of pension funding while addressing shifting demographics.
Escrivá highlighted that the latest projections differ from older sustainability factor calculations. He stated that, under the updated framework, a person retiring in 2027 would see a modest 2 percent reduction in pension, while a 25-year-old current worker could face a larger adjustment as they age into retirement. The minister emphasized that the reform does not require a dramatic rise in labor costs and should not erode competitiveness, a claim often echoed by critics from the CEOE who oppose the plan.
Escrivá described the reform as a gradual program, implemented over time in a prudent manner. He argued that the changes would not compromise the productive structure of Spanish businesses and stressed that this is a plan designed to evolve with the economy rather than impose sudden shifts. This stance counters concerns raised by the CEOE that the reform could threaten competitiveness and impose abrupt costs on firms.