Social Security must absorb 6.4 million more contributors if the aim is to close the budget gap and meet the goal by 2050 of a self-financing pension system, one that runs without extra state funding. This finding comes from a study by the BBVA Foundation and the Valencian Institute for Economic Research, which analyzes how Spain’s demographic shift affects public pensions.
The changes are driven primarily by an aging population and the retirement of the baby boom generation. Using estimates from INE and INSS, the study projects that the share of people aged 16 to 64 in the total population will fall from 65% in 2022 to 57% in 2050, while those over 64 will rise from 20% to 30%.
This shift further raises the demographic dependency ratio, the relation between people older than 64 and those of working age. The ratio is expected to climb from 31% in 2022 to 53.7% in 2050.
With these demographic trends, the financial health of the pension system already in deficit worsens. The study notes that to reach a zero budget deficit today, about 3.78 million more members would be required, which exceeds the total number of unemployed people counted in December 2022. As demographics shift, more than 6 million additional contributors would be needed by 2050 to sustain a financially balanced, deficit-free pension system.
delivery system
The authors remind readers that the contributory pension system in Spain operates on a pay-age basis, meaning a pension is paid from that same year’s income. A key drawback is exposure to demographic tensions, namely a rising number of retirees without a parallel increase in contributors. Constant inflows from members work best only if the remaining factors, especially the contribution bases, remain steady.
Yet the evolution of age structure matters a lot for the system because it determines whether there will be enough participants to keep pensions sustainable.
Approximately 8,800 Alicante retirees earn more than 3,000 euros per month
Excluding the passive class subsystems such as civil servant pensions granted before 2011, the most relevant data for assessing the health of the Social Security retirement plan is the balance of contributions. In brief, this balance includes revenues from contributions but excludes transfers aimed at reducing the real deficit; and it also includes the main outlays, the pension payments.
Social Security also reports a non-financial operation balance on a monthly basis. This measure moves away from the pure contribution balance due to the widening gap between benefits and revenues, which has forced the system to rely on transfers to cover not only ordinary expenses but also other outlays that contribute to the current deficit.
26.3 billion deficit
Since 2020 the two series have diverged. The most recent data, up to June 2023, show the annual deficit from non-financial activities at around 3.6 billion, while the contribution gap reached 1.98% of GDP, or 26.3 billion euros, based on December 2022 figures.
This deficit per member or per retiree can be framed as the number of additional members needed to close the contribution gap. If new entrants join the system with the current average contribution base, roughly 3,780,000 extra affiliates would be required to balance the budget in 2022.
Given the 3,024,000 unemployed people recorded in December 2022, it would be necessary to draw in a portion of the inactive population who are capable of work. Roughly 750,000 more people in this group would be needed, representing about 3.2% of the active population. A solution that relies on such a large increase in participation makes balancing the contribution gap a tough challenge.
Although predicting pension outcomes remains difficult, especially in a country where reforms are at different stages, INE projections for 2022–2072 show notable shifts. The share of workers aged 16 to 64 is expected to fall from 64.9% in 2022 to 56.5% in 2050. The over-64 group is projected to rise sharply, from 20.1% in 2022 to 30.4% in 2050.
Factors behind these changes include aging baby boomers, a low birth rate, and longer life expectancy. The birth rate is seen rising only slightly from 336,000 in 2023 to 387,000 in 2050 and 392,000 in 2070. Life expectancy for a 67-year-old is expected to extend from 19.98 years in 2023 to about 21.88 in 2050 and 22.60 in 2070. Migration alone is unlikely to offset the growth in pension obligations, with a projected net balance around 487,000 in 2023, dropping to 250,000 in 2050 and rising to 294,000 in 2070.
The share of the working-age group will shrink from 64.9% in 2022 to 56.5% in 2050, amplifying the pressure on pension funds.
dependency ratio
The trend is a rising ratio of those over 64 to those aged 16 to 64, climbing from 31% in 2022 to 53.7% in 2050, with a small dip afterward. The number of members per retiree grows only slightly from 2.1 in 2012 to 2.24 in 2022 and then declines to about 1.35 by 2050. Projections show about 15 million retirees by 2050 and an enlisted membership around 20,315,000, derived from current unemployment rates and the working-age population.
Tell me where you live in Alicante and I’ll tell you what pension you receive
Historical data on the relationship among the working-age population, active workers, and the Social Security deficit allows estimates of the active population share and the extra contributions needed to reach a zero deficit later. This analysis also indicates the effort required to attract new members from the active population.
The central scenario from the study shows that about 6.38 million additional members would be needed by 2050 to reach a zero deficit.