Spain | A decade of pension reforms and counter-reforms

Summary

Unlike the 2011 and 2013 reforms, the 2021 measures increase the projected deficit of the pension system and pass it on to the State, increase contributions, making job creation more expensive, and reduce intergenerational equity, in exchange for a greater budgetary burden on the younger generations.

Key points

• Key points:
• These new measures move Spain away from what most European countries have been doing for years, via automatic adjustments, sustainability factors and later retirement ages tied to life expectancy.
• The government has sacrificed automatic adjustment mechanisms and embraced discretionality, thus hindering Spain's return to the path of convergence with the most advanced European societies, as intended by the European NGEU funds.
• The 2011 reform, agreed with social partners, gradually postponed retirement age from 65 to 67 in 2027, increased the required number of years contributed from 15 to 25, and proposed a Sustainability Factor (SF) based on life expectancy to preserve proportionality between contributions to the system and expected benefits.
• The 2013 changes brought forward the implementation of the Sustainability Factor from 2027 to 2019, with details on calculation, and introduced the Pension Revaluation Index (IRP), based on the growth of the system's income and expenses.
• In the European Commission's forecasts, the 2011 and 2013 reforms would keep the pension system deficit contained to 2050, with an increase in expenditure of slightly less than 0.7 points of GDP.

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