The widow’s pension presents a particularity that Fedea wants to bring to the debate on the future of Social Security. A person can collect this benefit while continuing to work even if they have a high employment income. However, the situation may change when it is time to retire.
The Foundation for Applied Economics Studies (Fedea) proposes introducing a partial incompatibility between the widow’s pension and income from work during active life. The objective would be to use the resources obtained with this measure to improve the protection of widows and widowers who, upon retirement, see their benefit limited by the maximum limit of public pensions.
The proposal is part of a study prepared by Octavio Granado, former Secretary of State for Social Securitywhich analyzes different benefits of the system and demands that the debate go beyond retirement pensions.
A widow’s pension compatible with the salary, even if it is very high
The starting point of the report is a difference that occurs before and after retirement. During working life, the widow’s pension can be made compatible with income from work, even if it is high.
Fedea questions that this compatibility does not take into account how much the beneficiary earns. The study even raises the case of people whose income may be well above the average income and who, despite this, maintain widow’s benefit while continuing to work.
The scenario changes upon reaching retirement. At that time, the widow’s pension must coexist with the retirement or disability pension itself and limits such as the maximum limit of public pensions or the rules related to additions to minimums.
Fedea proposes partially limiting it while working
The proposal does not consist of withdrawing the widow’s pension from all people who have a job. What the study proposes is to establish a partial incompatibility between the benefit and income from work during active life.
This would allow the benefit to be reduced when the beneficiary has certain employment income. Fedea takes the German model as a reference and recalls that a measure of this type was proposed in Spain, although it ultimately did not go ahead.
The money released with this limitation would be used to reinforce the benefits of those who find themselves in the opposite situation. That is, widows and widowers who, upon reaching retirement, see the effective improvement in their income reduced by the limits that affect the amount of their pensions.
The example with which Fedea explains the problem
The study uses the case of a agrarian marriage to show how these rules work when rents are low. The two members receive a minimum pension of 12,441.80 euros per year after applying a minimum supplement of 3,341.80 euros on a base of 650 euros per month.
If one of them dies, the survivor generates a widow’s pension of 4,732 euros per year. However, the new benefit overlaps with the minimum supplement that he already received.
The result is that the real increase in their income is reduced to 99.35 euros per monthdespite having generated a widow’s pension of several thousand euros per year.
Fedea uses this situation to defend a different distribution of resources. His proposal involves partially limiting the compatibility with the salary during the work stage and using that savings to guarantee a minimum improvement to widows and widowers whose benefits are subsequently conditioned by the caps.
The widow’s pension could also change in the long term
The approach goes beyond this limitation. The report proposes to progressively study the replacement of the current model with a voluntary insurance for coupleswhich would assume part of the function currently performed by the widow’s pension.
It also proposes rebalancing spending between widow’s and orphan’s pensions. The study indicates that in 2025 approximately 13 euros for widows for every euro dedicated to orphanscompared to a ratio of 14 to 1 in 2005.
For now, it is about proposals included in a Fedea study and not from a reform approved by the Government. The document will serve as working material for the II Conference on the Public Pension and Social Security System, scheduled for next September 25.