The Foundation for Applied Economic Studies (Fedea) has presented a paper in which it appreciates an improvement in the structural sustainability of the public pension system in Spain after the reforms of 2021 and 2023, focused on strengthening revenues and delaying the effective retirement age.

However, the document insists that these conclusions should be taken “with great caution,” as they depend on a series of macroeconomic and demographic hypotheses that Fedea itself considers “excessively optimistic.”

The hypotheses and assumptions labeled as “excessively optimistic” by Fedea are those that the Government of Spain submitted to the European Commission to prepare its projections within the framework of the Ageing Report 2024.

The Ageing Report 2024 is a triennial report on the impact of demographic aging, jointly prepared by the European Commission and the Ageing Working Group of the Economic Policy Committee of the European Union.

Its purpose is to analyze the long-term budgetary and economic consequences of the aging population in all member states of the European Union.

The Fedea document, signed by researchers from the Universities of Valencia and Extremadura José Enrique Devesa, Inmaculada Domínguez, Borja Encinas, and Robert Meneu, proposes a new indicator of economic, financial, and actuarial sustainability constructed from the official data of the Ageing Report 2024.

In contrast to the traditional annual accounting balance between revenues and expenses, this indicator compares the value of expected benefits with that of contributions made by a cohort throughout its entire working life.

In the specific case of Spain, the projected structural indicator points to a significant long-term improvement, suggesting that measures aimed at strengthening revenues and raising the effective retirement age would contribute to a more balanced relationship between contributions and pensions.

The authors place Spain at the forefront in terms of structural sustainability when compared to Germany, France, the Netherlands, and Sweden.

In detail, the projected structural indicator changes from a value of 1.34 in 2022 to 0.90 in 2050 (below 1 the system moves towards sustainability).

In the comparative analysis with the other four countries, Spain is where this indicator decreases the most (-0.44 points), ahead of Sweden (-0.20), the Netherlands (-0.07), France (-0.06), and Germany (-0.02).

According to academics, this evolution is due to the dynamic effect of the reinforcement of income and the prolongation of working life introduced in the latest reforms.

However, researchers highlight an “apparent discrepancy” between this structural improvement and the classic indicator of financial balance, which anticipates that the retirement of the ‘baby boom’ generation will raise the system’s deficit by 2.5 percentage points of GDP between 2022 and 2050, the sixth largest increase in the European Union.

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