The Government is preparing a change in the pension increase formula to consolidate the spending adjustment


After the setback of the Omnibus Law and a summer with a zero harvest, the Government is working on a bill to change the automatic pension update formula and pensions that the Alberto Fernández government established with fines from 2020. The intention of President Javier Milei and the Minister of Economy Luis Caputo is to replace that mechanism – which is in force today – with one that allow the State to save on the most onerous bill you have to pay every month: the enormous Deficit financing in the provisional system..

The formula that Congress voted on at the urging of Fernández determines that retirements and pensions are updated based on the evolution of two indices: the collection of Anses and the salary increases of workers. These increases, however, is applied with a delay of four months. For example, from March, retirees and pensioners will receive an increase of 27.18%, which will reflect the variations in salaries and Anses collection between October and December 2023.

The great fear of the Government, and that is why wants the formula to be changed starting in April, This is what can happen from June, when it is time to increase retirees according to the salary and collection increases from Anses in January, February and March.

All calculations indicate that, after the inflation of 25.5% in December, with one of 20.6% in January, another of 15% estimated for February and just a few points less in the March forecast, the combination of the index increase in salaries and pension collection can lead to an increase in retirements of between 40% and 50%. This increase will have to be confronted by public coffers punished by the drop in revenue resulting from the recession and a period of slowing inflation that the Government itself expects for that moment.

To avoid this situation, Caputo and Milei are studying a new formula that, starting in April, will increase pensions following only the evolution of inflation. The key to savings for the State – and the consequent damage for retirees – is that the Economy does not want to compensate the assets by recovering all the loss of purchasing power suffered in the summer: The ruling party will only offer to increase retirements and pensions by 15% before launching the new formula. To put it another way: instead of the 40% or 50% increase that the current formula would yield, the Government wants to give only 15%.

La Libertad Avanza officials have already conveyed the general guidelines of the reform to several PRO legislators, but have not yet begun to seek the consensus they need outside of their closest allies for the law to be approved. Today, with the President embarked on daily fights with governors and the main leaders of the dialogue opposition Like the UCR and the bloc of deputies of the We Make Federal Coalition, that consensus seems very far away.

A good part of these spaces, which were previously unified in Together for Change, agree that the current formula is bad because it harms retirees in times of growth and defunds the State in periods of economic decline. For this reason, they prefer that the assets of retirees and pensioners be tied to inflation and are updated according to the index compiled monthly by INDEC.

The divergences are in the “splicing” period between the validity of the new and the old formula. Caputo intends that this connection will help him save budget by starting the inflation update from a time when pensions are lowand radicals and federals will try to start the new account from a higher level, in order to compensate for the loss of purchasing power accumulated in the income of the passive sector in recent months.

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