On 14 January 2020 the Council of Ministers approved a 0.9% rise in public pensions, backdated to 1 January and backed by an inflation guarantee. What each pensioner will receive.
On 14 January 2020 the Council of Ministers approved Royal Decree-Law 1/2020, which raises public pensions by 0.9%. It was one of the first decisions of the coalition government, at the first meeting of the Council of Ministers of the 14th legislature. The decree-law was published in the official gazette (BOE) on 15 January and came into force on the 16th, but the increase counts from 1 January.
Who it covers
The increase applies to contributory Social Security pensions, to State Civil Service (Clases Pasivas) pensions and to non-contributory pensions. According to the government, it benefits more than 11.1 million pensioners, who will receive the arrears for January in their February payment. The 0.9% is the government’s average inflation estimate for 2020.
The intention was not new. Royal Decree-Law 18/2019 of 27 December already recorded the commitment, communicated to the European Commission in Spain’s 2020 Draft Budgetary Plan, to update pensions by 0.9%. But with the government in a caretaker role the law limited what it could do, and the measure was put off until a new government was in place. The text also disapplies the ordinary revaluation mechanism of article 58 of the General Social Security Law.
Prime Minister Pedro Sánchez presented the measure as a correction of the 0.25% ceiling adopted in the past, which in his view had cost pensioners purchasing power. He also said the government will seek to renew the Toledo Pact with the other political and social forces, and that this work will be compatible with Spain’s commitments to the European Union on stability. As it is a royal decree-law, Congress must ratify it within thirty days of its promulgation.
The amounts
The text sets the amounts for 2020. The maximum public pension is €2,683.34 a month, or €37,566.76 a year. The minimum retirement pension for a 65-year-old is €11,807.60 a year if there is a dependent spouse (about €843.40 a month over fourteen payments), €9,569 for someone living alone and €9,081.80 if the spouse is not dependent. The widow’s pension is €9,569 a year for holders aged 65 or over, or with a disability of 65% or more, and €11,069.80 if there are dependants. The non-contributory pension is €5,538.40 a year.
The decree-law also contains a guarantee: if the average year-on-year change in consumer prices between December 2019 and November 2020 exceeds 0.9%, pensioners will receive, in a single payment before 1 April 2021, the difference between what they were paid and what they would have received with that rise.
What to review
Those who already receive a pension can check on the February payslip that the 0.9% and the January arrears have been applied. It is worth remembering that public pensions are taxed in personal income tax (IRPF) as employment income, so withholding and the tax return depend on each pensioner’s other income.
For those who will retire in the coming years, the figure that matters is the cap on the maximum pension: €2,683.34 a month in 2020. A career with high contribution bases will find that the public pension covers only part of its standard of living, and it is worth working out in good time what gap will have to be covered with personal savings or other income. Ask your adviser how this applies to your case.
The public pension rises with expected prices, but it still has a ceiling: what lies above it is for each family to provide.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
