In its new review of pension sustainability, the Airef reaffirmed this morning the opinion it gave last year: the spending rule is met and, therefore, the Government will not have to raise contributions, but it criticizes the analysis mechanism that has been set and warns that sustainability is not guaranteed.
Read more Inflation remains at 3.2% in May thanks to the tax cuts adopted due to the war
Therefore, a “formal” approval, but with criticisms of the indicator used and warnings about the future sustainability of the system. The result is that net pension spending on average in the period 2022 to 2050 stands at 13% of GDP; therefore, below the established limit of 13.3% which, if exceeded, would require measures to be taken and contributions to be raised. This 13% is an improvement compared to last year’s report, due to a higher estimate of the revenue impact to strengthen the system.
The Fiscal Authority reaches this conclusion by establishing that public spending on pensions remains at 14.6%, after incorporating the latest GDP and pension spending data for the years 2025 and 2025. From this amount, 1.6% of GDP in revenue measures is subtracted, resulting in the 13%. This represents an upward revision of these revenue measures.
An upward revision largely motivated by the reform of self-employed workers’ contributions which, with updated information, adds three tenths to these revenues. Other revenue measures are the Intergenerational Equity Mechanism (MEI), the increase in maximum contribution bases, the additional solidarity contribution, and increases in the minimum wage.
These calculations do not take into account the impact of the labor reform, where there is less temporary employment, but Airef considers that there is not yet sufficient evidence to incorporate a productivity improvement. Regarding the extraordinary regularization of immigrants, it is considered that in the long term it will have no impact.
Read more Catalonia extends the age to access the public loan for home purchase to 40 years
“The spending rule is met, but sustainability remains a challenge,” says Airef
To that formal approval, Airef adds criticism of the mechanism set for this review, which it does not consider adequate. This was explained by the president of Airef, Inés Olondriz, stating that “the spending rule is met, but sustainability remains a challenge and the spending rule should be reformed to make it consistent with the European fiscal framework.”
The report explains that “formal compliance with the pension spending rule does not imply that tensions over the sustainability of public accounts disappear.” In this regard, it warns that this scenario leads to an increase in debt that would reach 123% of GDP by 2050.
The design problems of the mechanism cited by Airef are those it already pointed out last year. An imprecise definition of revenue measures, with a warning that to finance the increase in pension spending transfers will have to increase, which will either reduce other items or increase debt. Another criticism is that it does not fit with the new European fiscal framework. That is why it proposes a reform of the pension spending rule to give more consistency to the analysis.
