Has the discussion about pension spending ended?

MadridSocial Security has taken a step forward in making diagnostic assessments of the pension system as complete as possible and without the need to rely on external reports. The ministry piloted by Elma Saiz has just launched a new tool that will allow it to make almost real-time projections of both the system's expenses and income. The objective is to observe whether it is sustainable or not, especially in the long term. But, is the discussion about what is one of the thunderboxes of economic policy over? In parallel to Social Security, Brussels carries out the same exercise, but in its own way.

"It was incomprehensible that, having one of the most powerful and useful databases in the [public] administration, we did not have our own tool," defended the Minister of Social Security, Elma Saiz, this Thursday during the presentation of the new model. One of the main differences between the new tool, christened INTegraSS, and the calculations made by organizations such as the Fiscal Authority (Airef) or the Bank of Spain is the fact that the ministry will not use samples (processed databases), but the entire universe of the State's pensioner population. Furthermore, the level of detail provided by Social Security is also higher: pensioner characteristics, data by gender or scheme, and type of retirement, among others. "It constitutes one of the main advantages," they indicate from this department.

The supervision of the Spanish pension system is important due to the challenges it must face and which put pressure on spending, especially in the future – it should be remembered that Social Security accounts for a relevant part of public resources, and therefore it is always under the watchful eye of Brussels, which in turn makes its own projections. Among these challenges are an increasingly aging population in Spain or the retirement of the baby boom generation, the largest, in the coming years. Both things pose a challenge to the system that raises ghosts: will pensions be payable?, will the system be equitable or will it represent too expensive a bill for future generations?

Different projections

After the presentation of the new tool, the Spanish government maintains its "optimism", in the words of the minister herself, regarding the answers to the two questions. From Social Security they hold on to the reforms of 2021 and 2022, but also to the evolution of macroeconomic and demographic data (the population will grow much more than expected due to the arrival of foreigners), to reiterate that the system is sustainable. Using the new tool, the ministry places net average pension spending at 14% of GDP during the period from 2022 to 2050, a year predicted to be one of maximum strain due to the complete exit from the labor market of all individuals who are part of the baby boom. From then on, it would begin to descend. This is a much more moderate projection compared to those drawn up by other bodies. The Fiscal Authority, for example, places it at 14.4% of GDP and the European Commission, at 14.6% after a recent review (initially, the community executive placed it above 15% of GDP).

But these projections point to a very long period of time, and in the meantime things can happen that change plans. Therefore, one of the problems with this long-term view is the degree of uncertainty, as acknowledged by the first vice-president and Minister of Economy, Carlos Cuerpo: "We are aware of the enormous uncertainty." To provide credibility and allay doubts, the Spanish government explains that the tool also takes into account unpredictable changes. "It analyzes possible shocks and incorporates a simulator on the impact of measures [linked to the pension system] that have to be approved," said Saiz.

All in all, the last major pension reform must undergo an assessment by Airef every three years. The first was in the spring of 2025 and the conclusion drawn was that with the changes in 2021 and 2022, the pension system's "spending rule" was being met, but that sustainability "was not improving", according to the body. To justify this, Airef focuses on the growth in the money spent to cover benefits, especially retirement pensions, which is driven by the revaluation of pensions with inflation.