Spain’s 10 million retirees are watching closely as the government prepares to update pension benefits for 2023. The revaluation plays a pivotal role in the country’s economy, with pension expenditures forming a substantial portion of public spending. The reform, crafted by the Ministry of Social Security, ties contribution margins to the year’s CPI performance, and the government has already laid out its forecasts in this area.
Finance Minister María Jesús Montero presented a preliminary draft of the General Government Budgets for the coming year. The public pension system is set to be funded at 190,687 million euros over the next year, representing about four in ten euros managed by the central State. The annual budget reflects an 11.4% rise from 2022, with various pensions, whether with or without a premium, slated for revaluation next year. The big question remains: by how much?
Contributing pensions
Most Spanish retirees receive a supplementary pension that totals roughly 9.9 million beneficiaries overall. The typical pension is adjusted annually, reflecting the level of contributions and the CPI, without requiring additional government mediation. This year has seen price inflation that is unusually strong, the highest in four decades, squeezing the purchasing power of many citizens. Still, retirees areProtected by the protections outlined in the new framework.
Currently, the CPI has shown a 9% year-on-year increase in September, though this figure may not be the exact parameter used by Social Security to determine future increases. The law specifies that the reference data will be the average CPI for November compared with the previous twelve months. As of December 14, the National Statistics Institute (INE) had not yet published consolidated CPI data, leaving retirees uncertain about the precise increase they can expect next year.
In 2023, pension expenditures are expected to rise by 11.4%, while investments are anticipated to grow by 33%.
Nevertheless, the government is already managing the forecast and has allocated funds for the increase. The executive has publicly stated plans to revalue pensions by around 8.5% starting next year. If the average pension stands at 1,257 euros per month, it could rise to about 1,363.8 euros monthly from next year.
Non-contributory pensions
Non-contributory pensions are granted not on the basis of contributions but on public-benefit criteria set by the State. These pensions are funded through Social Security and the General Government Budgets via the Imserso program. The most common forms include minimum pensions and disability pensions. Latest data show approximately 446,822 recipients of non-contributory assistance in Spain, with the baseline non-contributory pension set at around 421.4 euros per month.
Unlike contributory pensions, non-contributory ones are not automatically linked to CPI movements. Instead, the government sets annual increases. For example, to mitigate the impact of high inflation, the administration decided to raise these amounts by about 15% by year-end. Yet the exact increase for next year has not been announced yet. The Ministry of Finance is expected to publish the updated figures soon within the Budget framework. The IPREM index, which governs several non-contributory subsidies and has historically moved in step with minimum pensions, is projected to rise by about 3.6% under the new plans.