In the upcoming decades, Spain is predicted to allocate a higher portion of its GDP to public pension payments due to a pension reform introduced by Jose Luis Escriv. According to the Aging Report by the European Commission, Spain’s percentage of public pension spending is expected to reach 16.7% in 2070, an increase from its previously estimated ratio of 10.3% for the same year.
The rise in public spending on pensions can be largely attributed to measures such as annual pension revaluation based on inflation, which has resulted in significant increases in pension payouts. However, there is no consensus on the effectiveness of this mechanism, and some argue that it does not fully offset the rise in pension spending.
The pension reform introduced by Escriv includes changes to contribution rates for both self-employed and salaried workers, as well as adjustments to the computation period for pension calculations. These measures are expected to increase Social Security income as a percentage of GDP from 12.9% in 2022 to 14% in 2070. However, they may not fully offset the rise in pension spending, and the system is still expected to run a deficit.
Despite this projected deficit, Escriv’s reform includes a clause that allows for additional adjustments to be made if necessary in the future. The exact nature and extent of these adjustments will depend on ongoing evaluations by the Independent Authority for Fiscal Responsibility.
Overall, while Escriv’s pension reform aims to ensure the sustainability of Spain’s retirement system, further adjustments may be required in the future to maintain financial equilibrium as public spending on pensions continues on an upward trajectory due to various factors such as population aging and inflationary pressures.
