The Organization for Economic Cooperation and Development (OECD) calls into question the future of the sustainability of the Spanish pension system. The think tank of developed countries has published a report this Wednesday warning of the impact that the aging of the population will have on their substantiation. Specifically, it points out that, although demographic changes have registered an imbalance with respect to the rest of developed countries, aging will now accelerate at a very rapid rate, “putting strong pressure on financial sustainability.”
Several issues that directly affect the Spanish pension system are of concern to the organization. In the first place, the report indicates that the income of those over 65 in Spain is equivalent to around 96% of the average income of the total population, eight percentage points more than in the OECD as a whole.
In the same sense, it indicates that in 2020, the income ratio of the elderly grew eleven points compared to the rest of the population. Something that is motivated by the increase in spending on pensions compared to the growth of the average salary.
Furthermore, the OECD considers that the conditions for obtaining a full retirement pension in Spain are lax when compared to other countries. In this sense, when comparing the Spanish system with the French or German, the analysis cites that while in 2027, a Spanish worker can retire at 65 with a full pension if they have contributed 38.5 years, in France they do 43 years of contributions are missing and in Germany 45. Along the same lines, the OECD analysis highlights that while in the bulk of developed countries the pension is calculated taking into account the entire working career, in Spain the time limit is 25 years or less.
Regarding the sustainability of the Spanish system, the Paris-based organization has also highlighted the impact of the repeal of the sustainability factor, which has caused the replacement rate of pensions to grow to 89%. In the OECD the average is 62%.
Regarding this change, in the indexation of pensions to the CPI and in the intergenerational equity mechanism, the agency believes that “they illustrate that a consistent policy over time requires broad political consensus before its implementation.”
In any case, the body is not only limited to launching the alert to Spain, since the situation is global. Thus, the OECD advises developed countries that maintaining pensions will require a choice between increasing workers’ contributions, raising the retirement age or reducing pensions to maintain them.