Contrary to Airef’s analysis, the Ministry of Social Security released the report titled Public expenditure estimates on pensions in Spain this Tuesday. The document outlines the reforms implemented by the Government since 2021, aiming to curb expenditure while boosting revenue. It asserts that the pension system will remain sustainable through 2050, and that no new regulations or increases in social contributions are necessary, as these are part of the automatic protection mechanism embedded in the law.
The government projects a pension rise of about 4% in 2024
The commitment to Europe
The publication of this document aligns with the rescue plan linked to Spain’s Fourth payment of Next Generation EU funds, totaling €10,000 million. The Government is preparing to request this tranche from Brussels in the coming weeks.
As outlined in the Recovery Plan landmark 410, Spain should have published updated projections by the end of 2022, showing how the 2021 and 2022 pension reforms guarantee long-term fiscal sustainability. The analysis also considers the impact of other structural reforms, including labor-market changes. This report from the Ministry of Social Security paves the way for a Brussels request for the fourth payment of European funds, amounting to €10,000 million.
Economic and demographic forecasts
Relying on macroeconomic projections—growth, inflation, employment, and productivity—and on demographic indicators such as fertility, life expectancy, and migration, the 190-page document prepared by Acting Minister José Luis Escrivá states that pension expenditures will not exceed 15% of GDP through 2050. It also notes that revenue measures are expected to generate additional collections equivalent to about 1.8% of GDP each year on average.
Under the pension reform law, if these two conditions hold—pension outlays staying below 15% of GDP and revenue measures contributing at least 1.7% of GDP—the need for new regulations would not be triggered for 30 years. Airef, however, presents its own projections and anticipates that a revision could occur as soon as 2025 with the first model review.
The key divergence between Escrivá’s ministry and Airef centers on assumed productivity growth within the active population. The government document portrays higher productivity than Airef’s assessments.
Demographic projections assume a fertility rate of 1.36 children per woman by 2050 and life expectancy rising to 91.4 years for women and 87.1 years for men. Net migration is expected to be around 300,000 people annually, a level similar to recent years but higher than INE’s long-run estimate of roughly 200,000 per year.
The government’s scenario also factors in a gradual rise in employment driven by labor reform, delayed retirement incentives, and tighter labor-market conditions. The share of the population aged 65 and over is projected to increase from about 20% today to roughly 55% in 2050, while the proportion of people aged 66 to 70 is expected to rise from 5% to about 22%.
Other macro indicators in the projection include nominal GDP growth in the 3.5% to 4% range, inflation around 2%, and a rising, though controlled, business tax base to about 79.5% from the current 71%. If employment follows a slower path or declines in the later years, the unemployment rate could move from the current 11.4% to around 5.5%.
With these assumptions, and accounting for higher pensions for the baby-boom generation and adjustments tied to CPI, the Escrivá ministry estimates that pension spending will peak around 15% of GDP in the early 2040s and gradually fall to approximately 14.2% of GDP by 2050. During this period, the projected revenue measures are expected to supply resources averaging 1.8% of GDP annually.