Government 'will have to inject more and more money' to guarantee pension payments in Spain: this is why

Pensions are not at risk in the future, but the system's financing model will change significantly to give much more prominence to the central government's role in Spain, which will have to decide which expenses are to be prioritised and which are to be cut. This is the forecast of president of the independent authority for fiscal responsibility (Airef) Cristina Herrero, which she presented on Tuesday. Herrero harshly criticised the government and its interference in this institution responsible for auditing public accounts. She even called on Congreso for help to protect Airef's independence and said she has the support of the state legal service.

"They ask me: Are future pensions at risk? No, they will never have heard that from me. My answer is that they are as sustainable as spending on defence, healthcare, education," Herrero said. However, she added: "But we do need to know that the expected growth of contributions and pensions means that the role of the state as the main guarantor of the system is going to be increasingly greater, at least for some years to come."

In other words, the state will have to inject more money over the coming years to guarantee the payment of pensions, given that over the next three decades six million more pensioners will join the system and the average benefit will be revalued by more than 20%, which will imply a growth in spending of more than 4% of GDP until 2050. Herrero warned that the government will have to reorder spending priorities or adopt the necessary measures on the revenue side.

This high dependence on governmental injections into the social security (either to pay contributory pensions because the contributions collected are not sufficient or to finance the system's inappropriate expenses) was confirmed on Tuesday by Spain's first deputy PM María Jesús Montero, when she presented the government's spending ceiling for 2026. She revealed that the government plans to transfer 22.88 billion euros from the central administration to social security to meet the maximum recommendation of the Toledo pact. "This transfer is fully covered by the central government, which affects the budget deficit of our general government sector," she said.

However, this injection of money, similar to this year's, will not be enough to balance the social security accounts, which have been in the red for more than a decade. It will remain so at least until the end of the term, since the government will allow it to have a deficit margin of another 0.2% of GDP, just over three billion euros, both in 2026 and 2027. Even in 2028, the hole will continue with 0.1% of GDP. This means that neither the Toledo pact's mandate to balance the accounts nor the commitment made by then-minister José Luis Escrivá to the EU to ensure long-term sustainability will be met.

In this context, the president of the Airef unreservedly criticised the government's current policy of refilling the pension 'piggy bank'. "I don't understand why the reserve fund should grow while there is a deficit," she said.