For yet another year the Social Security accounts remain out of balance despite the recent pension reform. And, for yet another year, the Spanish pension system once again obtains a clear failure in a matter as important as sustainability. It even slightly reduces its score compared to 2022 and barely achieves 28.5 out of 100, which places Spain at the bottom of the world in this regard, according to the new ranking published every year by the consulting firm Mercer in which it analyzes and compares 47 retirement systems.
There are only two countries worse positioned in this aspect that measures whether the system can continue to function in the future and provide benefits: Austria, with just 22.6 out of 100; and Italy, with 23.7. Brazil and Argentina, like Spain, do not even reach 3 out of 10.
“Medium and long-term sustainability continues to be the main challenge facing our country’s pension system,” warns Miguel Ángel Menéndez, director of the Wealth area at Mercer Spain, who also warns that this vulnerability is seen ” “pressured” by the drop in the birth rate and the sharp rise in inflation.
However, Spain does achieve a good score, a remarkably high score, in the other two parameters that this index measures: sufficiency, that is, the generosity of pensions, in which it obtains 79.7 out of 100; and integrity, which measures whether the system can be trusted, which receives a 79.2.
In this way, Spain achieves a 61.6 out of 100 in the global ranking worldwide, a result a little worse than last year; specifically, two tenths lower. However, it remains in the same position, ranking 26th out of the 47 countries analyzed; that is, below the middle of the table.
With these scores, the index classifies Spain with a ‘C+’ grade, a system with positive elements but with shortcomings and risks that must be addressed so that its effectiveness and long-term sustainability are not questioned, according to the report published this year. Tuesday in which it lists the Netherlands, Iceland and Denmark as the three countries with the strongest pension systems.
Necessary measures
It should be noted, however, that the pension reform designed by Minister José Luis Escrivá has introduced several measures aimed, precisely, at increasing the income of the system, in deficit since 2012, to try to achieve the financial balance that is will be progressively deployed over the coming decades, such as the new intergenerational equity mechanism (MEI), the new solidarity quota, the extra increase in the maximum bases and the new contribution system for the self-employed based on their income. , among other. Which, presumably, should improve Social Security accounts, although the wave of ‘baby boomer’ retirements that will occur in the coming years will strain the system.
To improve the value of the global index of the Spanish system, the study recommends providing greater support to individuals with low purchasing power and older age, increasing the coverage of workers in pension plans through affiliation or registration automatic, and increase the participation rate of the active population at older ages.
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