The OECD asks Spain to adapt pensions to life expectancy and build 1.5 million homes for social rent

The Organization for Economic Cooperation and Development (OECD) has been one of the last organizations to request a pension reform. Specifically, it is necessary to promote a reform of the system to adapt the model to demographic change, marked by increased life expectancy. “The Spanish system has discouraged job continuity beyond the legal retirement age, which puts additional pressure on the system by reducing the number of people employed,” they maintain in the report.

Despite the changes carried out, such as the increase in the legal retirement age, the extension of the contribution period, the reform of the special regime for self-employed workers and the Intergenerational Equity Mechanism (MEI), it is expected that the gap between expenses and income will widen in the coming decades. “Although the reforms bring Spain closer to international practices that promote longer working lives, doubts remain about their administrative complexity and the extent to which they eliminate disincentives to combine work and pension,” they highlight, while stressing the need for “additional measures” to address the fiscal pressures derived from the higher cost of benefits in the future.

Spain’s independent fiscal council estimates that spending on retirement benefits will rise by 3.2% between 2023 and 2050, while aging-related spending could rise by up to 5.2 percentage points, slightly lower than previously forecast. “To put the debt on a downward path, it is necessary to address the increase in pension spending, reduce inefficient spending and improve tax revenues,” they state. In this sense, they warn of the inevitable rise in debt in the medium term in the absence of reforms.

The OECD has positively assessed the reduction of the fiscal deficit and the ratio of public debt to GDP in 2024 as a whole, to 3.2% of GDP and 101.8% of GDP, respectively, although it asks you to accelerate the pace. He believes that this would allow Spain to rebuild fiscal buffers more quickly to have room to respond to future recessions. However, he opposes the solution to raising contributions, something that could harm the labor market.