The upcoming pension reform by Jose Luis Escriv is predicted to increase Spain’s allocation of GDP to public pension payments in the coming decades. According to the European Commission’s Aging Report, this percentage is expected to reach 16.7% in the year 2070. Prior to this reform, it was estimated that Spain would rank lower in pension spending among European countries, with a projected ratio of 10.3% for the same year.
The increase in public spending on pensions can be attributed to several factors, including annual pension revaluation based on inflation, which has led to significant increases in pension payouts. While this measure was intended to ensure that pensioners maintain their purchasing power in the future, there is no consensus on its effectiveness.
In addition to these measures, Escriv’s reform introduced changes to contribution rates for both self-employed and salaried workers as well as adjustments to the computation period for pension calculations. These changes 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.
Despite this projected increase in income, the system is still expected to run a deficit, which is predicted to worsen over time. To address any imbalances, the reform includes a clause that allows for additional adjustments to be made in the future if necessary. The exact nature and extent of these adjustments will depend on ongoing evaluations by the Independent Authority for Fiscal Responsibility.
Overall, while Escriv’s reform aims to ensure the sustainability of Spain’s pension system, further adjustments may be required in the future
