Published on Tuesday, September 22, 2020

Spain | Public pensions after COVID-19

At the start of the COVID-19 crisis the Spanish public pensions system had already suffered from a chronic deficit. Since 2011 it has exhibited an imbalance, which amounted to around EUR 18 billion—1.4% of GDP—in 2019. There is little doubt that this economic crisis will be the most intense since World War II.

Key points

  • Key points:
  • According to the budget execution information for the 1H20, while tax revenues show a year-on-year decrease of 3.8%, pension expenditure increased by 3.0%.
  • Unlike in other countries such as the Netherlands or Sweden, the information that workers receive throughout their professional career regarding the relationship between their tax contributions and their future pension is clearly insufficient in Spain.
  • The problems with the Spanish public pension system are not unique to our country, therefore, fortunately, we can learn from the experience and good practices of other European countries.
  • The best strategy is to transition as soon as possible to a distribution system based on notional or individual accounts, introducing automatic, gradual adjustment mechanisms to protect the system's sustainability from any future scenario, thereby increasing contributiveness, equity, sufficiency and the long-term efficiency of the Spanish public pension system.

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