The government managed to reverse the downward trajectory in the first half of 2023 and began replenishing the country’s depleted financial cushion. Pensionscurrently stores show a total of €5.3 billion. An intergenerational equality mechanism, which took effect on January 1, 2023, began funding the Social Security reserve fund by feeding from the MEI, the social security contributions that cover most wage earners and are largely financed by corporations. Yet, funds set aside for future benefits accounted for 10% of the current total when first paid ten years earlier. Leaders such as Jose Luis Rodriguez Zapatero and later Mariano Rajoy leaned on the piggy bank to cover Social Security expenditures.
The reserve fund peaked in 2011 when it reached 66,815 million euros. From that point, available funds steadily declined due to the economic crisis and widespread layoffs, which reduced the income stream. Fewer contributors meant less disposable income, while spending rose, a trend the current Minister of Social Security, Jose Luis Escrivá, now describes as inappropriate. The reserve fund was drained to a low of 2,138 million euros in 2019.
For the first time in five years, the Social Security piggy bank shows a meaningful uptick in its available funds, though it remains far from the levels seen before the housing market collapse. In the first six months of the year, the balance rose from 2,141 million euros to 5,300 million euros. The amount has roughly doubled, but it still remains modest in the larger financial picture.
To put this into context, the state disburses around 11,997 million euros every month, which is more than double the current piggy bank balance. With the summer salary paid in June, the monthly payout reached 23,692 million euros. In other words, the available resources do not even cover a quarter of that salary.
According to SSK estimates, the fund is expected to close 2023 at 5,347 million euros, the highest level since November 2018, thanks to MEI revenues and the surpluses generated after the stability reserve is drawn down for professional contingencies, as the ministry reported on Wednesday.
The forecast is that the piggy bank will continue to grow in the coming years. On one hand, the active working population has reached an all-time high of 20.8 million people. On the other hand, the latest pension package will take effect next year, including higher MEI social contributions, a gradual rise in the maximum contribution bases, and an increased surcharge on top salaries. These measures are intended to keep feeding the pension reserve and building a cushion to fund benefits in the future when more people retire and fewer workers are active.
The most recent pension reform, phased in through 2050, has EU approval but has faced criticism from bodies such as the Independent Financial Responsibility Authority (Airef) and the Bank of Spain, which argue that revenue growth from the new measures may be overstated and that further adjustments or new income will be necessary to ensure the system’s sustainability.