The Intergenerational Equity Mechanism (MEI) is a new payroll tax that has entered the scene in 2023. It was born as a measure to guarantee the pension system, although its planned application has already undergone modifications in just a few months due to reluctance from Brussels.
Approved in the first part of the pension reform and published in the BOE on December 28, 2021, the MEI represents a 0.6% increase in contributions for common contingencies, distributed between the company and the worker with the same distribution than in social contributions. Specifically, 0.5% of the contribution is paid by the company and 0.1% by the worker.
Thus, from 2023 the salaried person loses 0.1% of his net salary to be received, while the contribution of the self-employed is variable. For a median contribution base of around 2,000 euros in salary, this 0.6% increase established by the MEI would mean a monthly contribution of 12 euros, of which two euros would be paid by the worker and 10 by the company. For the self-employed, the average is around five euros.
The forecast made by the Government when presenting the MEI was that the new tax would contribute between 2,000 and 3,000 million euros per year to the Reserve Fund, known as the pension piggy bank, in case it was necessary to activate it. This adjustment mechanism, designed by the Minister of Social Security, José Luis Escrivá, is incorporated to try to balance the accounts in the coming years, coinciding with the retirement of the so-called baby boom generation.
In principle, this payroll discount was going to be in force for 10 years, until 2033. However, the term was rejected outright by Brussels. According to the draft of the decree, the MEI will remain in place at least until 2050 and will even harden after 2025 if the government in power fails to carry out additional adjustment measures that are considered necessary.
In this way, the Government has already announced that the contribution will progressively double annually until reaching 1.2% in 2029, when the transitional period of application ends, with the company assuming 1% and the employee the remaining 0.2%.
“Minister Escrivá took the MEI out of his hat a year ago and sold us that with that pensions were guaranteed; twelve months later he doubled it to go from 0.6 to 1.2. The sustainability of pensions is not guaranteed in an excel sheet is guaranteed with employment,” criticizes Lorenzo Amor, CEOE’s vice president, in an interview with EL MUNDO.
The extension of the MEI joins the increase in contributions of the maximum bases for 25 years above inflation and the extension of the calculation period to access the pension from 25 to 30 years, which generated a reaction of union rejection and in the left of the government. From the Institute of Spanish Actuaries (IAE) they warn that these measures pose a certain risk of worsening the deficit of the system, which would force in the future to seek more income for Social Security or cut pensions, or both.
According to the criteria of The Trust Project
