OECD warned Spain: It will spend more than it earns with the pension reform

This was stated in a report released Wednesday, in which it also highlighted improvements brought by the previous head of Social Security. José Luis Escrivafor the lowest pensions and in pursuit of equality between men and women.

“Pension spending in Spain will rise rapidly until 2049. The increase in maximum contribution bases, added to the limited revaluation of maximum pensions, will help finance the increase in spending. However, the additional income will only cover part of the increase in pensions. This will mainly be due to the CPI increase in pensions.” It is due to the re-indexation to . Projected public expenditure will increase equivalent to: 2.4% of GDPThe OECD states that this will increase the budget deficit by 1.1 percent of GDP by 2050.

The international body confirms the projections already published by Airef, which warned following the approval of the latest pension reform that this would improve their quality at the expense of “worsening their sustainability”. Although the report’s authors refuse to assess the sustainability of the public system as a whole.

Spain currently spends the equivalent of 12.3% of its GDP on pensions and will reach a peak of 13.2% in 2045, according to estimates compiled by the OECD. On the other hand, a 0.9 point increase is less than what Germany would experience; this will increase from the current 10.3% to 12.1% in 2045 over the same period. Or Italy is expected to increase from the current 15.4% to 17.3%. In the year 2045.

During the last legislature, the government introduced a number of mechanisms to collect more of what will be phased in or introduced over the coming years. For example, so-called intergenerational equity mechanisms (MEI) are currently already in place; There is a slight (a priori temporary) increase of 0.6 percentage points in social contributions paid between workers and the company, but the latter has a large share. cost.

From 2025, the ‘solidarity rate’ will come into force, which consists of a tax imposed on companies employing highly paid workers and collected on the part of their salaries that are not currently contributing. To this should be added the gradual increase in maximum contribution bases above the maximum pension.

demographic problem

Spain has a demographic problem compared to the rest of Europe. And birth rate forecasts make it difficult to replace the ‘baby boom’ generation. In 1962, a woman had an average of 2.78 children; In 1982, this ratio dropped to 1.93; In 2002 it fell again to 1.24 and has now risen slightly to 1.29 children thanks to the migration movement.

The OECD average is 1.59 children, and according to the organization’s predictions, this gap will not be closed in the coming decades. There will be 1.4 children per Spaniard in 2042; Compared to 1.6 in the average OECD country.

Gradual increase in spending

Although Spain spends less than its neighbors, it is one of the countries that provides the most guarantees to its retirees in the OECD. Portugal anyone France. Each year it spends approx. 12.3% from him GDP The payment rate for the public system is above the OECD average (8.9%) and the European Union average (8.5%). Although comparable European countries spend more Italy (15.4%), France (14.8%) or Portugal (12.7%).

In relative terms, Spanish pensions are (and will be with the reform) some of the most generous pensions in the OECD.

Call replacement rateThe pension, which measures the level of pension based on the gross salary over the active life of workers who enter the labor market at age 22 and covers the contribution period, would be 80.4% in Spain, compared to the OECD average of 50.7%.

The sole country of the organization, Greeceoffers a relatively more generous replacement rate, with a pension equivalent to 80.8% of gross salary. The percentages are considerably lower in France (57.6%), Germany (43.9%), the United Kingdom (41.9%) or the United States (39.1%).