PENSION SYSTEM

Pension reform proposes decoupling benefits from inflation

Overhaul calls for pension entitlement parameters to be revised in line with state of economy

The government is preparing a reform of the pension system under which benefits will no longer be automatically indexed to inflation, Social Security sources said Wednesday.

The Popular Party (PP) government last week cited the need to meet its budget deficit target for this year as the reason for not complying with its obligation to top up pensions as a result of inflation being almost three times the official estimate.

The decoupling of pensions from inflation comes within a reform to ensure the system’s sustainability under which the main parameters determining pension entitlements – retirement age, the number of years of social security contributions required, and the period on which the calculation of pension income depends – are to be periodically revised.

The previous Socialist government introduced a reform under which the retirement age was raised progressively to 67 years on the basis of an extra month and a half of work every year through to 2027. However, Brussels wants this process to be speeded up.

The Socialists are leading a large group of opposition parties in an appeal against the government’s decision not to top up pensions this year.

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