The Independent Fiscal Responsibility Authority (Airef) has reaffirmed this Friday its previous diagnosis on the pension system: the latest reforms carried out by the Government allow compliance with the spending rule that prevents new changes in the law, but this does not guarantee the sustainability of the system. The analysis points out that “risks to long-term fiscal sustainability persist” and foresees a breach of the European fiscal framework. Therefore, Inés Olóndriz, president of the body, has “explicitly” asked the Government this Friday to “reform the spending rule” in two aspects: to link the cost of the system to the sustainability of public finances (for example, to the level of public debt) and to integrate it into the European fiscal framework, where, as she has insisted, “the Spanish rule does not fit.”
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The study presented this Friday responds to a request from the Executive for Airef to update the analysis carried out in 2025. At that time, the body already warned that, although the projections of the system’s evolution complied with the spending rule revised in the law, this did not imply that it was sustainable because it was at the limit of non-compliance. The calculation of net pension spending after revenue measures (the parameter now used by Brussels in fiscal rules) averaged 13.2% of GDP for the period 2022-2050. The law sets a maximum of 13.3%. With the new information available, the result has improved by almost two tenths, placing the spending level at 13%. The reduction is due to a greater impact of revenue measures, particularly the collection with the new contribution model for self-employed based on actual income.
For this reason, Airef points out that the spending rule “is formally complied with again,” but reaffirms the risks the system maintains for the sustainability of public accounts. Thus, the body detects “design problems” in this rule and makes several recommendations to modify it. First, they criticize that this rule “has a partial view of sustainability” since it is limited to pension spending and leaves out other costs linked to population aging (health, long-term care, etc.). It also considers that it makes “an imprecise definition of revenue measures.” Consequently, they conclude that “the references of the rule are not related to the sustainability of public accounts, as shown by the fact that its compliance is compatible with an increase in debt in the coming years.” In fact, the fiscal authority estimates that public debt will rise to 123% in 2050, mainly due to the spending pressure derived from population aging. According to its calculations, of the 52 percentage points of GDP by which debt will increase, 34 points are linked to the pressure exerted by such aging.
Furthermore, Airef estimates that to finance the expected increase in pension spending (up to 14.6% of GDP on average in the period 2022-2050, the year in which it will reach 16.4% of GDP, according to the new forecasts presented this Friday) it will be necessary to increase state contributions to pension payments. “This will reduce room for other policies (public spending). That is the case,” Olóndriz said.
Specifically, they have forecast that implicit transfers from the rest of the Social Security funds or from the central administration (via taxes) will need to increase by 2.3 points to reach 3% of GDP. This increase, they insist on warning from this body, if no other measures are taken (revenue or spending or both) “will mean a reduction in resources available for other spending policies or recourse to borrowing, which seems difficult to reconcile with the demands and fiscal frameworks at European and national levels.”
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The latter leads to the second recommendation Airef makes to the Government for the redesign of this rule. According to their complaint, the pension spending rule also does not fit into the new EU fiscal framework, which takes as an anchor the public debt level of each state, which in the Spanish case is not considered at any time in the current design of this rule to activate adjustment mechanisms. On the other hand, Europe also places as a key supervisory variable the net primary spending after revenue measures in terms of annual and accumulated variation rates, while the Spanish pension rule is determined in GDP level. The evaluation periods also do not coincide (three years for the Spanish rule and four for the European fiscal framework). All this leads the fiscal body to propose changes in the measurement of revenues and in the fulfillment of commitments that are comparable with the European fiscal framework.
In the study, the independent body also makes a first calculation of what the new regularization of immigrants will mean. Starting from a potential figure of 950,000 people who regularize their status, which will translate into about 337,000 new employed (discounting those who are not of working age or are already in the informal economy), an impact of more than 1,000 million in the first year is calculated. Specifically, Airef estimates that Social Security contribution collection will reach about 1,074 million, which Olóndriz has described as a “very moderate” effect of 0.067% of GDP.
The president of the body added that over the years, the permanence of these immigrants in the labor market will make this impact reach a maximum of 0.11 percentage points of GDP around 2030, the year from which their contribution to the system will be absorbed.
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