Pensions and their future always cause a lot of turmoil and debate. The Foundation for Applied Economic Research (Fedea) considers as “unreasonable” the forecasts of the Ministry of Participation, Social Security and Immigration on pension expenditures until 2050, published a few days ago by the Ministry headed by José Luis Escrivá. They warn in the same way “Overly optimistic” forecasts are sometimes used by governments to justify expansionary spending or delay adjustments.
The Ministry of Escrivá states that despite the revaluation of pensions due to inflation, the reforms carried out by the Government since 2021 to reduce expenses and increase revenue guarantee that the public pension system will be sustainable until 2050 and There will be no need to make new regulations or activate increases in social contributions It is a part of the automatic retirement security mechanism foreseen in the law.
Based on certain macroeconomic forecasts (growth, inflation, employment and productivityabove all) and demographic characteristics (fertility rate, life expectancy and migrationThe ministry includes figures that guarantee that until 2050, pension expenditure will never exceed 15% of GDP, and that the revenue measures adopted will additionally allow extra collections equivalent to 1.8% of GDP per capita. average year. According to this pension reform lawIf these two premises are actually met (pension expenditure does not rise above 15% of GDP and income measures contribute at least 1.7% of GDP), there will be no need for any new adjustments to the pension system. next 30 years.
Fedea, on the other hand, criticizes that the forecasts of the Ministry led by Escrivá “are based on more positive demographic and macroeconomic assumptions, as well as on more positive demographic and macroeconomic assumptions than those used by other institutions.” Predictions are poorly documented and sometimes not very reliable Evaluation of the effects on the budget of some measures of the last reform”. In conclusion, Fedea warns that the Government’s forecasts “underestimate” the effects of the reform on the pension system’s budget deficit and therefore on the available spending margin for other policies.
Fedea calculationsOn the contrary, it indicates a significant increase in retirement spending net of new income. Average GDP between 2022 and 2050 will increase by 1.5 points – approximately 52,000 million –In 2050, it will exceed 3.5 points, that is, 14 billion euros.
“These results show that the condition that triggers the safeguard clause of the Intergenerational Equity Mechanism (MEI) is already met today, which is as one might expect.” “We will require corrective measures to be taken at the review planned to be held two years from now.”emphasizes Fedea.
From an organizational perspective, the Ministry’s foresight report paints an “optimistic picture” of the financial prospects of the public pension system after the reform carried out by the Government, and according to Social Security calculations, this system will have almost no impact on the budget balance over the entire period. 2022-2050 and would leave average spending over the same period “comfortably” below the level that would activate the MEI safeguard clause.
In this scenario we are considering The government will not need to increase social contributions or take other compensatory measures. Fedea points out that the main differences between his predictions and those of the Ministry lie in the impact of delayed retirement incentives, the reform of the Special Regime for Self-Employed People (RETA) and the improvement of minimum pensions.
In the first two cases, the discrepancy is at least partly due to the fact that the Department’s estimates do not “include” trigger effects on future pension expenditures resulting from incentives to postpone retirement or from increases in pensions. freelancer emphasizes Fedea.
In the third case, that is, on minimum pensions, Fedea warns that “it is not taken into account” that the review of minimum and non-contributory pensions will lead not only to a certain increase in their amount, but also to a significant change in pensions. The rule of evolution that ceases to refer to inflation and is linked to the evolution of average income per capita.
“Worrying” predictions
On the other hand, Fedea warns that the Ministry’s scenario is based on some foundations its own population forecasts are “notably more optimistic than those of Eurostat”, It will form the basis for the Report on Aging 2024, on which the official evaluation of the system will be based, in line with the provisions of pension reform.
At this point, Fedea explains that, according to Eurostat’s estimates, the Ministry’s predictions envisage more migration flows, lower life expectancy between the ages of 65 and 67, and more employment starting from 2035.
“If Eurostat’s scenario is used instead of the Ministry’s demographic scenario, in the absence of recent reforms, total pension expenditure would increase from 15.65% to 16.90% in 2050, that is, more than 1.2 percentage points of GDP.
Also for one tenth of each year “If productivity growth is lower, pension spending will increase by around three-tenths of GDP in 2050.”says Fedea.
Similarly, Fedea argues that although the reform envisages the introduction of corrective mechanisms in case of upward deviations from net expenditure projections, “It is not advisable to underestimate the economic, political and social costs “We think that this activation will definitely lead to a significant increase in contribution rates,” he said.
“Given its already high level, a further increase in contributions to cover the growing deficit of the public pension system could have negative effects on potential growth, employment, productivity and ultimately well-being,” Fedea warns.
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“Upward trends” for the organization Ministry’s predictions are “worrying” because “the electoral dynamics of contemporary democracies are used to support overly optimistic forecasts, as well as being used as self-legitimizing tools, to justify expansive spending policies and/or delays in fiscal adjustments by governments.”
“This strategy is particularly risky in a country like Spain, which has shown signs of divergence from the EU in terms of per capita income and productivity over the last 15 years and causes a structural public deficit “This relatively high situation threatens to increase the already very high public debt and leaves limited room for maneuver to address other priorities or cope with negative shocks,” Fedea warns.