Spanish workers face another pay cut as pension tax bites harder
The Intergenerational Equity Mechanism will chip away at take-home pay until 2029, with next year's increase already locked in
The average salary in Spain doesn’t exactly set the world on fire, but anyone paying close attention to their payslip this year will have noticed that it’s looking even less impressive than usual.
The culprit is a little something called the Intergenerational Equity Mechanism, or MEI for short. It's essentially a tax designed to prop up Spain's creaking pension system and it's been quietly nibbling away at workers' take-home pay throughout 2025. The problem is, it's about to take a bigger bite.
Unlike your standard annual tax, this one hits every single month and affects everyone who pays into Social Security, regardless of how much you earn or what job you do. And the worst part is that it's not finished yet.
Instead, the MEI will keep climbing year on year until it reaches its peak in 2029, where it's expected to stay put until at least 2050.
In January 2026, the contribution rate will jump again, this time from 0.80% to 0.90% of your gross salary. Your employer will pay 0.75% of that, whilst you'll be left covering 0.15%. It might not sound like much, but it all adds up over time.
Here's what this actually means for your bank account. If you're earning €1,200 a month, you'll be contributing €1.80 towards the MEI, while your employer chips in €9. On a €1,500 salary, you're looking at €2.25 from your pocket and €11.25 from the company.
Earning €2,000 means €3 from you and €15 from your employer. And if you're on €2,500, you'll be paying €3.75 while the company contributes €18.75.
It's all in the name of securing pensions for future generations as the baby boomers continue to drain resources but right now, it just means less money landing in your account each month. And with three more years of increases still to come, Spanish workers might want to brace themselves for an increasingly tight squeeze.
Image: Archive
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