Two million Spanish pensioners receive over €2,000 a month

The elephant: two million pensioners receive more than €2,000

The latest Social Security statistics have once again spotlighted the State's biggest bill: nearly two million pensioners in Spain now receive more than €2,000 a month, 15% more than a year ago. The average pension, however, stands at €1,596, painting a picture of a system split in two: a minority living comfortably and half of all pensioners below the minimum wage.

The CPI that doesn't match the shopping basket

Every year, pension uprating is calculated using average CPI. The problem is that the official indicator pointed to 3%, when it has been above that figure for months and, with energy prices soaring, everything suggests it will end up between 3.8% and 4%. In other words, the actual increase will be higher than expected, and that shows in the pockets of the 10 million pensioners. For public finances, every tenth of a point of CPI means hundreds of millions in additional spending.

The underlying debate: contributory or non-contributory?

Two narratives clash here. On one side, defenders of the contributory system argue that those receiving the maximum pension have contributed more than they receive, and that the real hole lies in minimum pensions, non-contributory pensions and the IMV (Minimum Vital Income, a means-tested benefit), which are granted without requiring a lifetime of contributions. On the other side, calculations show that a maximum pension, over the average life expectancy of 21 years, exceeds one million euros, an amount nobody has contributed in the last four decades. No one has paid a million euros into Social Security, not even those who contributed at the maximum base for 40 years: in total, around €720,000. The discrepancy is no small matter: it determines who is robbing whom.

The calculation trap: from two years to a whole working life

Part of the answer lies in history. Until 1985, only the last two years of contributions were needed to calculate the pension; it was then extended to eight, later to fifteen and, since 2011, has been gradually raised to 25 years. That change explains why there are pensioners who contributed for only six years and collected a pension for 29, as has been documented in some cases. Today, the rules are much tougher, but the bill for the old rules keeps being paid. For new retirees, the average over the entire working life is already on the table.

The future: boomers, the IMV and an impossible equation

The problem will only grow. The boomers are retiring, generations who contributed on decent wages and often with two incomes per household. At the same time, more than a million people receive almost €800 from the IMV without having contributed a single day, and non-contributory benefits continue to expand. The result is a system that distributes money with no one quite knowing where it will come from: the reserve fund is empty, the Social Security deficit is covered by taxes, and the debt will be paid by the young. There are proposals of every kind, from capping high pensions to taxing retirees' rental income, or aligning the taxation of capital with that of labour, but none has gone beyond wishful thinking.

The analysis stalls on the same old question: who should pay for the party? Defenders of the contributory system point to the IMV; those looking at the overall figures, at maximum pensions. The only thing that seems clear is that, with 10 million votes at stake, no party wants to touch the elephant. And the elephant, meanwhile, keeps growing.