Pension system latest publications
This article addresses a number of recent, ongoing changes to the pension system in Spain, notably the revaluation of pensions based on the CPI, the introduction of the Intergenerational Equity Mechanism, and occupational and individual pension plans. We also discuss the key challenges that lie ahead.
The recommendations of the Pension Commission of the Spanish Congress (Pacto de Toledo) are a good starting point for addressing gradual changes in the system, but they are not enough to ensure its sustainability. If the appropriate measures are not taken, the recommendations have the potential to imbalance the system.
Recently, the COVID-19 crisis has highlighted how the Spanish pension system's financial sustainability problems are worsening. The Ministry of Social Security is predicting a GDP deficit of 4.1% for 2020.
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.
The structure of the current Spanish pension scheme is essentially the same as when it was set up at the end of the 1960s. In the 50 years that have gone by since its creation, the only changes it has seen have been to its parameters.
Distributive pension systems such as Spain’s are based on an implied inter-generational contract between workers and pensioners. A contract which in addition to being sustainable in the long term and providing adequate pensions, must also be balanced and efficient. Without sustainability, adequacy cannot be assured.
October 19, 2017
El sistema público de pensiones en España: reformas recientes y propuestas de mejora
El sistema público de pensiones es un pilar básico del Estado de bienestar. El sistema de pensiones en España es perfectamente viable y sostenible, siempre que se adapte a los continuos cambios económicos, sociales y demográficos que experimenta la sociedad española. El reto es encontrar un doble equilibrio ante cambios con…
The persistent Social Security deficit and the continuous tapping of the Reserve Fund, which has dropped 62% from the 66.8 billion of 2011, has spurred another intense debate about the viability of Spain’s pension system.