The Solution to the Spanish Pension System
9 January 2017
It is increasingly evident that public pensions are going to be hard to sustain in the future: the ratio of workers to pensioners is close to a historical low. The crisis has taken nearly two million contributors out of the system, and adds to another variable that proves a greater challenge and is even more difficult to reverse: demographics.
In 1971, only 9.7% of the population was aged over 65. Today, that number has grown to over 18.8% of
the population, and will grow to 38.7% by 2060. By then, there will hardly be 1.27 people of working age for every over-65 year old – one third of today’s rate.
This situation calls for four possible solutions: first, a progressive pushing back of retirement age; second, a substantial reduction of pensions themselves; third, a drastic increase in social security contributions; or fourth, a progressive adoption of an alternative system: one which capitalizes retirement pensions.
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EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).
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