Posting in Government
MADRID -- Spain's Rajoy government debates changing the retirement age from 67 to variable, based on life expectancy and employment.
MADRID -- Retirement is for many the light at the end of the tunnel. But, what if, your retirement plans weren't the same as everyone else's, but were based on what you do? Or based on your individual, statistical life expectancy? The Rajoy government, following the advice of the European Commission, is considering just that, as they look to cut the biggest chunk of the Spanish annual budget -- pensions.
Last Friday, the Spanish government sent their perspective 2013-2014 budget to the European Commission, the executive body of the EU. This is to see how Spain plans to meet their deficit targets in 2014, before any more aid is promised.
Spain shares the same problem with the rest of the Western world: the baby boomers are a drain on the social security coffers. The main focus of of the newly-proposed budget is cuts to unemployment insurance--now paid to nearly a quarter of the Spanish population -- and indirect cuts to pension plans -- which makes up a quarter of the entire Spanish national budget for 120 billion euros.
Cutting pensions and raising the retirement age each decade is simply referred to as a "sustainability factor." Rajoy and his cabinet are exploring a "more sustainable" and variable retirement age "based on the evolution of life expectancy." The average life expectancy in Spain is 81 and climbing.
The retirement and social security collection age was already pushed last year from 65 to 67. In the last decade, that age has increased from 61 to 63 and then to 65. The steps to raise the retirement age are all in-line with EU goals. Even though the 2012 budget just began, the 2013-2014 budget was presented to the European Commission last week, which is expected to complete the 102 billion euros in cutbacks the EU wants to see over the next three years.
One of Rajoy's goals is not to raise the set age of retirement higher than 67 -- yet --, but to make sure it's more greatly enforced. The effective retirement age is on average two years under the official age. In 2010, Spain had one of the highest averages in Europe at 63.5 years. One of the main goals of the budget sent to Brussels is to try to get the effective to meet the actual edad de jubilacion. When the standard was at 65, the average age to retire was 63. The trend seems to be following that now folks are stopping to work at age 65. Rajoy's team has sent a note along with their budget proposal, promising stricter laws about access to early and partial retirement to prevent further misuse of it. In addition, if companies push someone to an early retirement, they will now have to fund at least part of that pension. Right now, the government holds the entire burden of early retirees.
Another problem is that you can begin to collect retirement benefits currently at 67, but people do not have the option of waiting a bit to retire. Some Spanish, especially if they have lower-paying jobs, are willing to work until 70 years of age, but they don't have the option; retirement is a set process that you can, under current law, speed up, but not slow down.
Spain's business daily El Economista earlier this week had an article talking about how retirement should be a greater choice and that the laws extending the retirement age aren't even a bad thing, but that it must be a choice. The experts also countered the government's new policy against partial retirement. They think it's more natural to phase out the intensity, as well as phase out their income tax contributions. In general, it could be a smoother financial and professional transition for society as a whole.
When more than 100 billion euros from a budget, you need to get creative. The Rajoy government is even discussing predicting more specific life expectancy factors, like profession, into the retirement age.
Your life expectancy goes down when you work longer hours -- like sales, restaurant work or often mid-level management -- or when your trabajo is dangerous -- like police officers, firefighters, construction workers, loggers and deep-sea fisherman. Following this train of thought, since the construction backbone of the Spanish economy is broken, there are fewer people doing this back-breaking work, thus the general life expectancy will rise.
No matter what the age, the Spanish are not ready to see their pensions cut.
A recent survey by Accenture, subtitled "Majority of people globally are worried about outliving their money at retirement," found that 91 percent of the Spanish are worried about their financial situation after retirement., while a mere 17 percent think their savings will cover their financial needs upon retirement. The vast majority of the Spanish are worried what will happen to the future of their state-sponsored pension plans.
Since pension is part of the quasi-socialist government's package, there isn't a natural habit to save for retirement here. Up until the economic crisis, the focus of saving has always been in order to buy a home. Mortgages are often paid off before retirement, and then later, houses are usually passed down within the family. While saving is an idea, it's not something promoted through companies, who don't push for 401Ks or pension plans. You pay into the Social Security pension plan all your life and thus expect to depend mainly on that.
Of course, with nearly a quarter of the population unemployed and paying only the minimum in social security, it all comes back to Spain having a serious revenue problem.
Photo: Gobierno de España
Aug 9, 2012
"Cutting pensions and raising the retirement age each decade is simply referred to as a 'sustainability factor.'" And, when our elders remain in their jobs as long as possible, how will room be made for youngsters entering the workforce? And, when our elders cannot find a job because no one wants to hire the elderly, what are they supposed to live on between the time of their last employment and the time of their retirement?
Lets face it, some jobs are physically more abusive than others. Police, Fire, military, athletics, coal miners and the like. Some jobs your body just will not let you do for until you are 65. Does that mean all of these people should be entitled to retire at 45? No. It means they need to plan their lives around a career change at some point. It is not the governments job to tell them when, but some guidance would not hurt. In particular for public servants, should their retirement plans support these people for 40 years or more of retirement at tax payer expense? Personally in most cases I say NO. Should their retirement packages include retraining? Probably. Should they get some kind of a modest pension to ease the transition to a second career? Probably. Should that modest amount increase at say 65? Probably. But those are points to be negotiated with the appropriate unions representing most of these people. Of course there would be appropriate provisions for those injured in the line of duty, like police and fire. Does there need to be significant retirement reform for public servants? Yes. Legal scams are rampent across the nation. What you do not want is a repeat of the decades long MBTA/Mass Port retirement scam in Massachusetts. If you had the political connections you could get a job out of high school at 18 working for the MBTA and retire after 20 years. At 38 you would then retire with a near 100 percent of your salary. Then your second career would be getting hired at Mass Port, usually as a no show parking garage attendant at Logan Airport. Where you would WORK another 20 years and at age 58 retire with a second near full salary pension. The combined pensions have routinely totaled nearly $300,000 A YEAR. The last estimate had over 10,000 people participating in this political pig fest at the taxpayer trough since it became legal over 60 years ago. The big exception I have is the military. If a person dedicates 20 or more years of their life to defending our nation they should automatically be provided a decent retirement, retraining if wanted and quality health care. They earned it.
The very thought of the government determining when you retire is a bad joke. I can only hope not too many people see their only option for retirement as government sponsorship. Take some freeking responsibility for your own welfare and life...retire when you want and how you want. Or not and be told what to do and when to do it. The choice is yours.
This is a very good article, as a native spanish and unemployed Senior Engineer I'm considering seriously the emigration choice... Social Security is being killed by this government, there's no job possible in a near future... It's a shame, but all qualified spanish workers are doing or thinking about the same thing. It seem a jump back in time, to the 1940's and 50's decade...
[i]And, when our elders remain in their jobs as long as possible, how will room be made for youngsters entering the workforce?[/i] We will need people working longer to create more wealth to sustain them when they retire. If they all retire so early, the taxes that will have to be levied upon the young will be so high they they won't bother working either.
If I worked a job until I qualified for retirement, then worked another job until I qualified for that retirement, what have I done wrong? This kind of retirement plan may not make good fiscal sense for the funding organization, but I would have legally earned what was available to me to earn. Sounds like a good capitalist worker, to me.
...that you are listening to a distinctly European perspective. Personally, I wholly agree with you that it's simply absurd that a government should decide when an individual should retire. But they don't. They accept it as a given, along with the idea that it's the government's responsibility to take care of them which is now their big problem. From a historical perspective, the idea that average citizens should be able to retire at a given age with the expectancy that they will live many more is a very new one; only a couple of generations. Recall that when first implemented, our own Social Security only kicked in at the age of 65 when the average life expectancy was 61. It was intended as a safety net to prevent people who had managed to outlive their own retirement savings from becoming destitute. It was never intended to serve as a retirees primary income. Since with most of these systems, retirement age has not been raised to meet life expectancy, two things have happened: The systems have become fundamentally bankrupt, and the citizenry expects them to fully fund their lifestyles literally decades after retirement. For any of these systems to remain viable, people are going to have to change that perception, which, unfortunately, will be politically impossible.
These were hack jobs. Most of the Mass Port jobs were no show jobs that people got a pay check and never showed up for work. That is illegal. When they did show up they slept in peoples cars at the airport garage because technically they were parking attendants. And please explain to me why a 2,000 space garage needs 200 parking attendants on a shift? That is corruption. While the retirement plans weres technically legal it was nothing more than politicians taking care of their own at the taxpayers expense. That is called corruption. The only people who thought it was ok to do were the people getting the money. It is more like a good old entitlement mentality government worker to me. Do you have any morals mdwalls. Or are you a screw the taxpayer kind of government worker?
" . . . along with the idea that it's the government's responsibility to take care of them . . . " Paying into an insurance program, and then collecting, is not the government taking care of someone. " It was intended as a safety net to prevent people who had managed to outlive their own retirement savings from becoming destitute. It was never intended to serve as a retirees primary income." I think you need to re-read that History. At the time, the majority of our elders were in poverty and had no savings to retire on. If we don't make enough money to live on, how on earth can we be expected to save for retirement? Really, some people live in a bubble unaware of what goes on around them.