Spain will raise most public pensions by 2.5% in 2022, boosting the average pensioner’s income by around 250 euros ($281.78) a year Social Security Minister Jose Luis Escriva said on Tuesday after a cabinet meeting where the increase was approved.

The lowest public pensions will increase by 3%, he added, while inflation reached 6.5% in 2021. Overall, the pension increase will cost some 6.5 billion euros.

($1 = 0.8872 euros)

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The newspaper El Economista explains today that on the same day as the Government approves the increase in pensions for this year, it will also have to come up with an extra almost 3.125 billion euros to finance the operation. This follows the deviation between the price estimate forecast by the Executive in the current General Budget and the strong rise in inflation in the last few months of 2021. It has ended up throwing the accounts approved four months ago out of kilter. Between the approval of the Budget and this Tuesday’s decree on the revaluation of the payments, the CPI for October (+5.4%) and November (+5.5%) have meant that the 1.9% rise forecast will have to go up to 2.5%, in order to cover the maintenance of purchasing power for the average for the whole of 2021.

If the cost of raising pensions with the 1.9% initially estimated amounted to almost 2.4 billion euros, the 0.6 tenth of a percentage point deviation will add another 750 million euros to the final bill. This will bring the outlay to over 3 billion euros for the annual update in 2022 alone. We need to remember that the law approved in the first part of the pension reform on the revaluation of payments sets the average amount triggered by the CPI in the previous twelve months – this average stood at 2.5% between December 2020 and November 2021.

However, the Social Security’s financial effort at the start of the year does not end here. Although the new rate of increase compensates for any losses in purchasing power with the final average, there is still one last small payment to be made, this February, for the deviation in the increase made at the beginning of 2021, of 0.9% and the aforementioned final average CPI of 2.5%. As this increase was based on the previous estimate of price increases and these have finally grown by 1.6% more, this amount must be paid now as compensation for the loss of purchasing power, of the same volume, recorded in the balance at year-end.

Specifically, the cost of this will be around 2 billion euros. This means that the first two payments by the Social Security in terms of pensions alone will cost approximately 5 billion euros.

According to the Minister of Inclusion, Social Security and Migration, José Luis Escrivá, it is expected that the amount paid out will be between 220 and 340 euros, depending on the minimum and maximum amounts applied to each benefit. Meanwhile for widows’ and widowers’ pensions it will be 166 euros.

Source: The Corner