The soap opera of mutual societies is beginning to end. Lawyers, solicitors, architects, and other professionals have been demanding for years a bridge to convert the money saved through their professional mutual societies into years contributed to Social Security. Their goal? To access decent pensions. Now, these mutual societies are paying pensions, in some cases, of less than 300 euros per month. This week, the Justice Committee of the Congress of Deputies approved the report of the bill to create that bridge, which had been stalled for almost a year.
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Political groups have agreed that self-employed workers who contribute to the professional association can transfer the capital to Social Security and access the minimum retirement pension. The reform, promoted by the Ministry of Social Security led by Elma Saiz, is entering its final phase of parliamentary processing after passing this first filter in Congress. The text will be debated in committee before its final approval in the coming weeks.
Who will be able to access it?
The measure is aimed at professionals who contribute through alternative mutual societies instead of doing so in Social Security. The proposal approved in committee expands access to the bridge to all alternative mutualists. The ministry’s original proposal only allowed access to those who joined the system before 2005.
Will it be mandatory to change?
No. Self-employed workers will be able to decide whether they want to continue contributing through their professional mutual society or if they prefer that it converts their savings into contributions to Social Security. Firms such as the Lawyers’ Mutual Society or the Solicitors’ Mutual Society are already assessing how many of their clients will choose to leave.
How is the savings converted into contribution years?
This is one of the points of greatest disagreement among the parties involved. The groups of lawyers and solicitors demanded that each year contributed to the mutual society be converted into a year contributed, for the calculation of the retirement pension.
The problem was that, on many occasions, the contribution levels to the mutual societies had been much lower than the minimum contributions to the Special Regime for Self-Employed Workers of Social Security, known as RETA.
Finally, the regime agreed in committee establishes a conversion coefficient of 0.77, which will determine how those savings are transformed into contribution periods and the future pension. Thus, 10 years of contributions to the professional mutual society will become about seven and a half years of contribution to Social Security.
There will be a special regime for those over 55 years old, who no longer have much margin for contribution regarding the pension. Here, each year contributed in the mutual society will be recognized as a year in Social Security. This way, they will be able to access the minimum RETA pension.
What other conditions are there?
To access this bridge, mutualists must meet two main conditions. First, not already be Social Security pensioners, except in cases of widowhood. Second, not have the minimum contribution period required for a public pension.
How will the capital be transferred?
The text also foresees a progressive transfer of capital from the mutual societies to the public system, although the specific details will be defined later through regulatory development.
The Lawyers’ Mutual Society demands that the transfer of mutualists’ funds not occur until the time of each one’s retirement, “to avoid the early liquidation of long-term investments made with the contributions of the mutualists, which could negatively affect their profitability.”
All in all, these entities have been preparing for this moment for years and believe their viability is more than guaranteed.
What about those who recently switched to RETA?
The text approved in committee foresees a special agreement to enable the recognition of up to five years of contributions for those former mutualists who decided to leave the alternative system and lost contributions.
What is the origin of the conflict?
Professional mutual societies emerged in the early years of the Franco dictatorship. In 1944, the National Brotherhood of Architects was created to help this guild with old-age pensions; in 1948, the lawyers’ mutual society arose, the largest of all, mandatory for all lawyers, which would provide assistance after retirement and offer orphan and widow pensions. There were also mutual societies for notaries, priests, bank employees…
Until 1995, lawyers and other professional groups were required to contribute through their corresponding mutual society, and it was the entity that established how much they had to contribute.
In the case of social welfare mutual societies, the seams began to burst due to the aging population. Originally, these insurers operated with a pay-as-you-go system: as much money came in each year, that much was distributed. As happens with Social Security. But as life expectancy increased, the model became more and more unsustainable.