New Year, New Pension Reform: Implementation of Solidarity Fee in Spain’s Public Pensions System

The Government has taken a decisive step towards implementing the ‘solidarity fee’ on January 1, 2025. This fee is a surcharge that will be imposed on workers with salaries higher than the maximum contribution base, which is currently set at 54,000 euros per year. The purpose of this fee is to fund public pensions.

The solidarity fee will apply to the amount of salary that exceeds the maximum contribution base. This amount, which was previously exempt from Social Security contributions due to the base cap, will now be taxed at rates of 5.5%, 6%, and 7% based on different salary thresholds. The fee will be updated in 2025 to reflect the increase in the maximum contribution base approved by the Government.

The distribution of the solidarity fee between the company and the worker will be in proportion to their respective contributions for common contingencies. For example, workers earning between 70,000 and 100,000 euros will have to pay an additional 7,500 euros each year to Social Security. The objective of these measures is to strengthen Social Security income, especially in anticipation of future expenses and demographic shifts.

The Government aims to increase Social Security income by implementing the solidarity fee alongside other measures like the Intergenerational Equity Mechanism (MEI) that was introduced in 2023. The system faces rising expenses due to factors like an increase in retirees and higher pension payouts. Despite these additional income streams, significant transfers are still received from the State to balance Social Security accounts.

In summary, this week saw a crucial step towards implementing a new measure that could significantly impact public pensions and social security funds in Spain – namely, a solidarity fee set for January 1st