Annual benefits ranging from €230 to €880 will be received by pensioners – beyond tax exemptions – from pension increases, which according to the budget appear to close at 2.5% plus a 0.3% corrective percentage they will receive in February with the finalization of inflation.
Which pensioners will see real money in their pockets
Based on the 2.8% increases, pensioners will see their income rise from €14 per month for €500 pensions up to €36.5 for pensions up to €1,300 and €70 for pensions up to €2,500.
Two categories of pensioners will have variation in the increase percentage, which will be due to the solidarity contribution (EAS) and are as follows:
1. Pensioners with personal difference (671,586 beneficiaries) will receive half the increase and the remaining amount will be offset against the personal difference. From 2027 onwards they will receive the full increase in their pocket.
2. Pensioners who continue to work after retirement are entitled, in addition to the increase, to a pension supplement calculated according to the months or years they complete as working pensioners and the contributions they paid for their employment. For each full year of employment they are entitled to a 0.77% increase on pensionable income.
Pensioners who will receive an increase that exceeds the personal difference by 50%-99% will have a net increase that covers at least 50% of the personal difference. So if the increase is €30 and the personal difference is €10, the net gain will be €20, meaning they receive 67% of the €30 increase, etc.
Pensioners who will have an increase smaller than the remainder of the personal difference will receive 50% of the increase in their pocket, maintaining the personal difference, which will be completely abolished in 2027.
Pensioners: Tax reductions that boost net income
1. Simultaneously, the regulation for indexing the EAS changes the amounts on which deductions are imposed. Thus, the pension limit that will be exempt from deduction will rise to €1,469.85, from €1,434 today, for which 3% is withheld, provided pension increases fluctuate at 2.5%, without the corrective percentage for closing inflation. Beneficiaries of EAS indexing will also be pensioners in the second, third and subsequent brackets with pensions above €1,468. Approximately 400,000 pensioners with main pension income or sum of main pensions above €1,435 are burdened with solidarity contribution, where EAS deductions begin. The new EAS deduction scale with 2.5% indexing is expected to be: For pensions from €1,469 to €1,784, 3% deduction; for pensions from €1,785 to €2,099, 6% deduction, and so forth.
- For example, a pensioner receiving a main pension of €1,740 in 2025 has 3% EAS deduction and pays €52.2. With a 2.5% increase for 2026, the pension will rise to €1,782 and the deduction will remain at 3%.
2. Pensioners will benefit in net amounts due to reduced tax withholding effective from 1/1/2026.
- For example, a pensioner receiving a €1,000 pension has monthly tax withholding of €43.58. From January the tax reduces to €40.25 and net pension increases by €3.3.
- Also, a pensioner currently receiving a net pension of €1,416 has monthly tax withholding of €153.58. From January the tax reduces to €140.25 and the pension increases by €13.33.
Published in Apogeumatini
