Spain | Pension reform and social preferences

Summary

Over the last two years we have witnessed numerous changes to the pension system in Spain, making it more generous, but less self-sufficient, with a larger structural deficit, no adjustment for increased life expectancy and greater dependence on transfers from the State.

Key points

• Key points:
• The projected increase in the deficit from 2022 to 2050 due to these measures varies from the Government's most optimistic forecast (3 tenths of a percentage point of GDP) to the most pessimistic forecast by Ángel de la Fuente (2.8 points of GDP), including the intermediate estimate by the AIReF (1.1% of GDP).
• Using AIReF's assumptions, the difference between total spending on pensions and contributory transfers and total social contributions will double from 2.3 points of GDP in 2022 to 4.7 points in 2047. To this deficit must also be added other non-contributory benefits (such as the Minimum Vital Income), and current and personnel expenditure (3 tenths more).
• Two principles must be satisfied if social support is to be aware of the implications of the reforms and if they are to last over time: First, it is necessary to reach the broadest possible consensus.
• Second, a balanced analysis of the costs, risks and benefits of the reforms must be presented to society. The current reform chooses to increase spending and pass on to the future the economic cost of having less margin for other public policies, and to increase taxes on labor, which will be a burden on employment, economic growth and convergence with the most advanced European societies.

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