The government has abandoned its pension boost formula, which would have resulted in more than 8% for the vast majority of pensioners, but in light of the commitments it has made, it will have to revise legislation providing that most pensions (up to about 960 euros) rose by 4.43% in January..
The executive branch said that the amount of half of the pension paid in October (corresponding to 3.57% of the annual pension amount), added to the increases determined for January, ensures that pensioners do not live to the end of next year with less liquidity. they would be if the formula (although they have been losing money since 2024).
It turns out that the legislation takes into account not only the dynamics of GDP over the past two years, but also the average inflation, excluding housing, recorded in November, and both of them exceed expectations at the time of the calculations in September.
Latest GDP estimates (confirmed today) indicate an average growth of 4.78%, above the 4.5% considered by the Government. And average non-housing inflation in November was 7.46%, according to the INE’s first estimate, above the 7.1% considered by the executive.
This means that, mainly due to inflation, in the case of the lowest pensions, it may be necessary to add four or five tenths to the government’s forecast of 4.43%, thus bringing the nominal growth in January closer to 4.8%. or 4.9%. The values are not exact, since it is enough to round the average GDP to tenths or hundredths for the output to change slightly. Pension increase at the first pillar yes, round to tenths.
This is due to the fact that in a normal situation, with growth above 3%, updating pensions to IFRS 2 would correspond to 20% of average GDP (0.96 points) plus the value of the average CPI excluding housing in November (7.46 points), but the Government now removes the amount of the emergency supplement corresponding to the half board already paid in October (3.57 points).
In the case of a pension of 500 euros, for example, an increase of approximately 24.2 euros will be applied. The difference guaranteed by the correction compared to what the government has already announced is 2.7 euros per month.
Similarly, pensions between IAS 6 and 12 could increase by four tenths (in addition to the 4% forecast, to 4.49%) and then, to IAS 12, by 3.5 tenths (to 3.89).
Nothing will prevent the executive branch, which has the majority, from amending its own law. At the proposal of the PS, an amendment to the Law on the State Budget for 2023 was approved, which authorizes the Government to make corrections by its decree.
Negosios has reached out to the Ministry of Labor and Social Security (MTSSS) for comment and is awaiting a response.
The Social Assistance Index (IAS) will also rise
Although it was announced that the Social Assistance Index (IAS) would rise by 8% next year, the government has not repealed the law which stipulates that this index, on which a number of social benefits depend, is calculated in the same way as the first pillar. pensions: 20% of GDP plus average inflation in the absence of housing at the end of the year (confirmed, this will be November).
The Department of Labor has already assured Business that it will also update IAS to comply with the legal terms. Thus, if the current figures are confirmed, this figure could increase by about 8.4% instead of the declared 8% to 481.09 euros in 2023.
The IAS depends, for example, on the minimum and maximum amount of the unemployment subsidy, the amount of the social unemployment subsidy and the updated levels of various benefits, including pensions. This should also depend on the RSI value, a legal rule that has been forgotten in recent years.
The news was last updated at 12:49 pm with estimates slightly adjusted for a new average calculated from today’s GDP data. The IAS value has been adjusted to EUR 481.09.
