The European Commission’s Aging Report, published on Friday, recommends that Spain increase the percentage of its GDP allocated to public pensions in the coming decades. This change is primarily due to measures introduced by former minister Jose Luis Escriv, such as annual pension revaluations based on inflation. These increases in spending are expected to have a significant impact on Social Security accounts.
Escriv’s reform aimed to maintain the purchasing power of pensioners and ensure that pensions would not lose value in the future. However, the increase in public spending on pensions is forecasted to rise significantly over the years, reaching a peak in 2051.
To address this issue, other initiatives such as increases in contributions and changes in pension calculations have been implemented to generate more income for the system. The overall goal is to maintain the sustainability of the pension system by balancing income and expenses.
Despite these efforts, the system is still expected to face a budget deficit, which will worsen over time. To address this, provisions for automatic adjustments based on evaluations by the Independent Authority for Fiscal Responsibility (AIReF) have been included in the reform.
The ultimate goal of this reform is to ensure long-term sustainability of the pension system, but additional adjustments may be necessary in the future if there are any discrepancies between income and expenses. AIReF will play a key role in monitoring these changes and providing recommendations to the government if further adjustments are required.