Fedea calculates that Escrivá’s measures to delay retirement represent savings “far below” what the Government estimated
The measures to delay the retirement age adopted in the latest pension reform will bring a “unimportant” and “very below” savings than what Social Security estimated in the last legislature. This is the assessment made by economists of Fedea of one of the Government’s star measures to reduce the increase in future spending on pensions that will bring with it the massive retirement of baby boomers and the reform itself designed by José Luis Escrivá.
Fedea economists believe that the measures designed by the former Minister of Social Security They manage to discourage early retirement and also encourage workers to delay their retirement date. But, even so, this would not be enough to achieve a notable reduction in pension spending as the Government intends, according to its calculations.
Specifically, they estimate that The savings that would be achieved would range between nothing and 0.22 points of GDP until 2050. A figure very far from the Government’s forecasts, which estimated the savings from delayed retirement incentives at 1.4 points of GDP. The estimate is also far from the 0.8 points of GDP savings projected by Airef.
However, the calculations of Fedea – a foundation linked to the large Ibex companies, but whose work enjoys notable academic prestige – do They are quite close to what was calculated by the Bank of Spain in its latest annual report. The banking supervisor believes that, even in the unlikely scenario in which all retiring people decide to delay their retirement by one year, savings would reach at most five tenths of GDP.
Deter and incentivize
The Government introduced two major measures in the previous pension reform to ensure that workers retire later. On the one hand, the former minister Escrivá changed the penalty system for those who anticipate their retirementto harden it in some cases and relax it in others.
But the most important measure was a increased incentives to delay retirement. More specifically, the Executive introduced a 4% bonus in the pension for each year that retirement is delayed, with the possibility of replacing this percentage with a fixed amount to be collected at once.
How have the workers reacted? Fedea experts estimate that The percentage of people who voluntarily early retire decreased from 26.8% in 2021 to 24% in 2022, when the incentive was already in place. However, the average pension has increased as a result.
Besides, The time it takes to withdraw also fell from 6.2 to 5.2 quarters. The effect on delayed retirement is also modest. At Fedea they calculate that delayed retirements went from 6% of the total to 6.3% in 2022, while the number of years delayed increased from 2.8 to 2.9.
In any case, it must be taken into account that The forecasts are uncertain and complex, as it is a 25-year scenario. Major analysts do not even agree on whether delaying retirement will increase or reduce pension spending. And nor on the effect that keeping workers in the labor market for longer could have on economic growth.
A third of pensioners do not choose the best option
Another conclusion that draws attention is that workers have certain difficulties when choosing which bonus is better for them when they delay their retirement beyond what is legal. At Fedea they estimate that only in 64% of cases is the best decision made from an economic or financial point of view. The latest data collected by Fedea reflects that 28.1% of people choose to cash a single check and 72% the 4% complement.
When a worker delays his retirement, he must choose whether to charge a 4% surcharge on his pension for each year of delay for the rest of his life or whether he receives a fixed amount at the beginning and that’s it. Age, sex or probability of survival are factors that determine which is the optimal option.
