The Council of Ministers has approved the Draft Social Security Measures Act, which sets out a comprehensive reform of the system, in line with the Agreement on Social Security Measures signed by the Government, CEOE, CEPYME, UGT and CCOO in June 2006.
Written by Josep Conesa
Employment and insolvency lawyer
The Draft Act covers measures relating to system consolidation, family support, extended working life, temporary disability (IT) and retirement. Its primary objective is to secure the future of pensions by making the system more equitable and financially sustainable.
This is the first Social Security reform in Spain's democratic history to have been signed by both major trade unions, the employers' associations CEOE and CEPYME, and the Government.
The Draft Act seeks to align with recent labour market reforms, balancing improved benefits and resource management with the goal of promoting economic growth within a framework of greater business competitiveness.
In summary, this is an agreement that safeguards the public pension system, adapting to social change while maintaining the balance between improved benefits and the financial health of the system.
KEY CHANGES
· Retirement
The so-called "quota days" will be abolished — meaning that, when calculating the minimum contribution period required to qualify for a pension, only days actually worked and contributed will count, excluding those corresponding to extra payments. As a result, the minimum contribution period will be set at 5,475 effective days (15 years) of contributions.
The retirement age will be reduced for categories of work classified as toxic, hazardous or unhealthy, and for people with disabilities, provided that the retirement age may not in any case fall below 52 years. This measure will be implemented through increased contribution rates for these groups during their working lives, thereby avoiding any adverse impact on the system's finances.
The increase in pension for each year of contributions made after the age of 65 will be 2%. For workers with 40 years of active working life, this increase will reach 3% per year.
· Partial retirement
To qualify for early partial retirement, workers must have reached the age of 60, have made 30 years of contributions, and have 6 years of seniority with the company. For members of mutual societies who joined before 1 January 1967, the age threshold of 60 is maintained.
· temporary disability (IT)
A new complaints procedure before the Medical Inspectorate of the Public Health Services is being introduced to enhance legal certainty. This new procedure may be used in cases where, after twelve months of temporary disability (IT), the worker disagrees with the medical discharge issued by the managing body of the Social Security.
· Permanent disability
The minimum contribution period required to access permanent disability benefit for workers under 31 years of age is being reduced and will be set at one third of the time elapsed between the age of 16 and the date on which the entitlement to the pension arises.
A new formula will also be introduced to calculate permanent disability benefit and the severe disability supplement:
· For the purposes of calculating permanent disability, years of contributions will be taken into account (currently they are not), with the aim of preventing identical benefits being generated for short and long contribution records.
· The severe disability supplement will be partially decoupled from the pension amount in order to achieve greater equity. This supplement is designed to offset the costs incurred by the person caring for the disabled individual. Currently it stands at 50% of the regulatory base of the pension; the reform envisages replacing this with a sum equal to 50% of the minimum contribution base plus 25% of the contribution base corresponding to the employee.
· Survivor's pension
For the first time since 1978, a reform of survivor's pensions is being addressed:
A key measure is the equalisation of rights between married couples and registered domestic partners with regard to the survivor's pension. The survivor's pension entitlement is extended to registered domestic partners who can demonstrate at least five years of cohabitation or who have children in common.
This recognition for de facto couples also extends to the death grant and to lump-sum compensation in the event of death arising from a work-related accident or occupational illness.
In the event of divorce, a survivor's pension will only be payable where the claimant has been formally awarded a compensatory pension. Where, following divorce, there are multiple beneficiaries entitled to a pension, a minimum of 50% of the regulatory base of the survivor's pension is guaranteed in favour of the surviving spouse (or of a person who, without being a spouse, can demonstrate cohabitation with the deceased).
De facto couples who cannot demonstrate five years of cohabitation or the existence of children, as well as marriages of less than two years with no children, will be entitled to a temporary survivor's pension where the deceased dies from a common illness.
LEGISLATIVE IMPLEMENTATION OF THE AGREEMENT ON Social Security
This Draft Law implements part of the agreements reached by the Government in July with the CEOE, CEPYME, UGT and CCOO trade unions and employer organisations, but does not cover all aspects of those agreements. Certain elements are included in the General State Budget Law for 2007, as follows:
· New premium schedule for occupational contingencies.
· Uprating of the maximum contribution base in line with actual CPI.
· Improvement of minimum orphan's pensions for children under 18 with a disability of 65% or above.
· Extension to workers aged 59 of the existing contribution rebates already available to workers over 60 with five years' service.
· Equalisation of the minimum survivor's pension for widows with dependent family members or a disability of 65% or above — regardless of age — with that applicable to widows over 65.
