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The OECD aligns itself with the AIReF and warns that the pension reform in Spain will increase the deficit

MADRID, 13 Dic.

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The OECD aligns itself with the AIReF and warns that the pension reform in Spain will increase the deficit


The reform of the pension system in Spain, undertaken by the Government between 2021 and 2023, will mean a greater increase in expenses than the expected growth in income, according to the Organization for Economic Cooperation and Development (OECD), which includes the approach of the Independent Authority for Fiscal Responsibility (AIReF) when warning of an increase in the deficit of 1.1 percentage points by 2050.

In its report 'Pensions at a glance 2023', in which it examines the changes introduced in the systems of the 38 OECD countries, the 'think tank' of the most advanced economies points out that the latest Spanish reform aims to reduce future pension deficits by increasing additional income, while improving the protection of low-income pensioners and people with irregular careers.

In this sense, he highlights that the Spanish reform is based on higher contributions, particularly from people with higher incomes, which are only offset to a small extent by the increase in their pensions, which will be used to improve pension finances and build the reserve fund.

In total, based on AIReF calculations, it is estimated that these measures, together with a reform of self-employed contributions, will generate annual income of 1.3% of GDP in 2050, adding that, given the forecast of a rapid increase of pension expenditure until 2049, the sharp increase in the maximum contribution base, combined with a limited increase in the maximum pension, will help finance the increase in expenditure.

However, the OECD warns that the additional revenue "only partially covers the growing expenses derived mainly from the reintroduction of indexation", since annual expenses are expected to increase by 2.4% of GDP, "which will translate in a projected increase in the deficit of 1.1% of GDP in 2050".

On the other hand, he points out that, regarding the extension of the reference contribution period for calculating pensions, which was a key demand of the European Commission, "instead of introducing a significant change in this area", Spain opted for a small extent and a long transition period with "unclear" impacts.

Thus, from 2022, the reference contribution period is the last 25 years, which was increased compared to the last 15 years in 2013. With the reform, these will become the best 27 of the last 29 years of career for people who retire after 2044.

Until then, the OECD reminds that people can choose the more beneficial of the two calculation methods, "which means that until 2044 this change can only increase benefits and expenses."

In any case, the Paris-based organization points out that Spain will continue to be one of the few OECD countries that does not use the entire working life of citizens to calculate pensions.

Among the 38 member countries of the OECD, currently only Colombia (10 years), Slovenia (24), Costa Rica (currently 20 that will become 25), France (25), Spain (25 to 27), the United States ( 35) and Portugal (40) do not count the entire working career.?