The Spanish public pension system is funded by social contributions from workers and employers, with current pensions being paid out of these contributions. However, these contributions are not enough to cover the entire pension bill, so the system also relies on general taxes for financing. This has led to a debate about how the growing use of taxes to pay pensions is affecting the allocation of resources to other areas.
Research shows that the contributory part of the pension system, funded by social contributions, has been in the red. In 2023, this deficit amounted to 55,919 million euros, which is equivalent to 3.8 points of GDP. The government argues that using taxes to supplement the pension system is a common practice in other countries, but researchers believe that a closer examination of the system’s finances is necessary to ensure sustainability.
The Social Security system has also relied on specific transfers from the State to cover parts of the pension bill, such as supplements for minimum pensions and other expenses. This has led to a large contributory deficit that needs to be financed through debt and general taxes. While the government defends this approach, researchers argue that a transparent analysis of the pension system’s finances is essential for making informed decisions about its future.
The debate over the financing of the pension system is crucial, as it impacts the allocation of resources in the public sector. The more tax resources are needed to fund pensions, the less funding there will be available for other public spending priorities. By understanding the financial challenges facing the pension system, policymakers can take the necessary steps to ensure its long-term sustainability.