Pensions and their future always stir debate. The Foundation for Applied Economic Research (Fedea) labels as unreasonable the Ministry of Inclusion, Social Security and Migration forecasts on pension expenditures through 2050, recently released by the ministry led by José Luis Escrivá. Fedea cautions that optimistic projections are sometimes used by governments to justify bigger spending or postponed reforms.
The Escrivá ministry argues that the pension system remains sustainable until 2050 thanks to reforms since 2021 that cut costs and boost revenue. These measures supposedly prevent the need for new rules or higher social contributions and form part of the automatic retirement security mechanism defined in law.
Relying on macroeconomic projections such as growth, inflation, employment, and especially productivity, alongside demographic factors like fertility, life expectancy, and migration, the ministry presents figures claiming that pension expenditure will stay below 15 percent of GDP through 2050. It also estimates that revenue measures will add about 1.8 percent of GDP per capita on average. If pension expenditure does not exceed 15 percent of GDP and revenue gains reach at least 1.7 percent of GDP, the ministry says no further adjustments will be needed over the next three decades.
Fedea disagrees, arguing that the ministry’s forecasts rest on more favorable demographic and macroeconomic assumptions than those used by other institutions. It contends that the government has documented estimates and evaluated effects on the budget inadequately. In short, Fedea warns that the forecasts underestimate how reform affects the pension system deficit and, consequently, the available margin for other policy areas.
Fedea projects a larger increase in retirement spending net of new income. It estimates that average GDP growth between 2022 and 2050 will be around 1.5 percentage points higher, translating to roughly 52 billion euros in 2050, and that total spending could surpass 3.5 percentage points, equating to about 14 billion euros in 2050.
The group notes that the trigger for the Intergenerational Equity Mechanism (MEI) is already met today, suggesting corrective steps will be required at the planned review two years from now. It emphasizes the need for proactive measures.
From an organizational standpoint, the ministry presents an optimistic view of the public pension system after the reform, with calculations showing almost no adverse effect on the budget balance from 2022 to 2050 and average spending comfortably below the MEI threshold.
The divergence between Fedea and the ministerial forecast centers on delayed retirement incentives, reforms affecting the Special Regime for Self-Employed People (RETA), and the evolution of minimum pensions. In the first two cases, the ministry’s estimates do not fully account for the effects of postponed retirement or increased self-employment pensions. In the case of minimum pensions, Fedea warns that increasing the base and non-contributory pensions will not only raise amounts but also alter the rules linking pension growth to income per capita rather than inflation.
Worries arise when it comes to the ministry’s demographic assumptions. Fedea notes that the ministry’s outlook leans on population projections that are notably more optimistic than Eurostat’s. This discrepancy will inform the Aging 2024 report, which will shape the official assessment of the pension system.
If Eurostat’s demographic scenario is used in place of the ministry’s, without additional reforms, total pension expenditure could rise from 15.65 percent of GDP in 2050 to 16.90 percent, an increase exceeding 1.2 percentage points of GDP. If productivity growth slows, the growth in pension spending could add another ~0.3 percentage points of GDP by 2050, according to Fedea.
Fedea also argues that although the reform anticipates corrective mechanisms for upward deviations in net expenditure projections, there are political and social costs associated with triggering those adjustments. The organization warns that activating higher contribution rates could slow potential growth, reduce employment and productivity, and ultimately affect well being.
The discussion highlights a broader issue: fiscal resilience hinges on credible assumptions and transparent evaluation. Fedea cautions that optimistic forecasts carry electoral and policy risks and may limit the capacity to respond to negative shocks. The analysis stresses the need for sound public finance management in a country with high public debt and constrained policy maneuvering.
This debate continues to shape how policy makers, economists, and the public view pension reform, its costs, and its long term effects on social protection, labor markets, and macroeconomic stability. The emphasis remains on balancing sustainable financing with humane social protections and an adaptable pension framework that can weather demographic and economic shifts without triggering abrupt policy shifts or market instability.