Spain | Growing expenditure on public pensions

The 2021-2023 pension reform has resulted in a system that will be more generous, but less contributory and self-sufficient, as social security contributions are not able to finance the higher expenditure on pensions.

Key points

• Key points:
• This is the main conclusion of the European Commission's recent Ageing Report for 2024 (AR 2024), with its updated forecasts of Spain's pension expenditure until 2070.
• The report is issued every three years; thus, the previous one was in 2021, just when a set of important modifications to our public pension system was introduced, which concluded in 2023.
• By reducing its self-sufficiency, the system is more dependent on transfers from the central government, which reduces its transparency regarding the true funding cost of the pension system and ends up transmitting to society a distorted image of its opportunity cost and the smaller margin for other public policies.
• Spain is by far the EU country where pension expenditure has risen the most in the new forecasts with respect to the 2021 scenario. According to forecasts in the new Aging Report, the reform increases pension spending by 3.3 GDP percentage points in 2050 and by 5 in 2070, on average about 1 percentage point more of pension expenditure per decade.
• According to the AR 2024, contribution revenues will increase from 10.6% of GDP in 2023 to 12.6% in 2050. Nevertheless, this increase of 2 GDP percentage points will be insufficient to meet the projected increase in pension expenditure, so that the system's financing needs will increase from 4 GDP percentage points in 2023 to around 5.7 in 2050.

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