The OECD factors out the shortage of Spain’s pension fund: it solely represents 0.4% of GDP | Economy | EUROtoday

The Organization for Economic Cooperation and Development (OECD) revealed its report this Monday Pension Markets in Focus 2024one of many major sources of information in regards to the state and evolution of pension markets and methods in developed international locations. And among the many most related conclusions drawn about Spain, it stands out that its Reserve Fund, often known as the general public pension piggy financial institution, solely represented 0.4% of GDP on the finish of 2023. It is the bottom stage among the many 19 international locations. with obtainable information. The Ministry of Social Security remembers that in 2019, within the first phases of Pedro Sánchez as head of the Government, the fund had about 2,100 million euros, lower than half of what it was on the finish of final 12 months (5,300) and that this 12 months will finish in 9,300.

In relative phrases, in order that the dimensions of every public piggy financial institution will be in contrast with out distortion by the inhabitants, Spain registers the worst information together with Mexico, with 0.4% of GDP. The group with the worst numbers is accomplished by Poland (1.9%), Chile (2.7%) and Switzerland (6.3%). On the opposite facet of the dimensions are two superior Asian democracies: South Korea (46.3%) and Japan (38.3%). They additionally save greater than 30% of their GDP for pension contingencies in Luxembourg (33.1%), Finland (32.2%) and Sweden (31.4%). The different European international locations that present information, Portugal (11.2%), France (7%) and Norway (6.9%), additionally report significantly better information than Spain.

In absolute phrases, by quantity, the best determine is that of the United States, with 2,641,000 million {dollars} (about 2,509,000 million euros), adopted by Japan (1,595,000 million {dollars}) and South Korea ( 803,000 million). The OECD determine for Spain, on the finish of 2023, is 6 billion {dollars}, 5.7 billion euros. The determine coincides with the Social Security report as of December 31 of final 12 months, which estimated the quantity of the Reserve Fund at 5,578 million euros and that this represented 0.38% of GDP, consistent with the calculation of the worldwide group. According to Social Security estimates, the piggy financial institution will finish in 2024 at round 9.3 billion.

“The size of the reserves of the public distribution system varies significantly between countries. Korea and Japan had the largest amounts of public pay-as-you-go system reserves relative to the size of their economies (46% and 38% of GDP, respectively). In contrast, Spain had the lowest reserves (both in dollars and as a percentage of GDP) among the countries that reported,” the report highlights, which on the identical time clarifies: “The differences in the size of the reserves can be attributed to factors such as the date of creation of the reserve fund, its purpose, any limit or objective on its size, and the expected date of its depletion.

Likewise, the report indicates that in 2023 “some countries, such as Spain, decided to strengthen their public pension reserve fund.” It says that Spain “had almost exhausted its reserves and decided to replenish them in 2023 by transferring the surplus from mutual companies and the Intergenerational Equity Mechanism.” This is without doubt one of the normal strains of argument of the Ministry of Social Security to elucidate the state of the Reserve Fund: that the present Government is replenishing it and that it was emptied through the Mariano Rajoy period. At the identical time, the PP alluded to the Great Recession and the inheritance obtained from José Luis Rodríguez Zapatero because the explanation why the pension fund was virtually empty.

Social Security appreciates a optimistic evolution

Asked in regards to the information provided by the report, the ministry headed by Elma Saiz factors out: “The current Government has once again given the relevance it deserves to the Social Security Reserve Fund. It now plays a crucial role among the instruments to strengthen the system and is nourished by the contributions of the Intergenerational Equity Mechanism. In 2019, the fund had just over 2.1 billion; at the end of 2023, with almost 5.6 billion; and this year it will end around 9,300. According to forecasts, the current legislature will end in 2027 with 31,000 million euros in the fund.”

At the identical time, the ministry remembers that the MEI, the primary instrument that’s increasing the Reserve Fund, “was born within social dialogue and has been operational since January 2023.” Along the identical strains, they spotlight that the regulation determines that the Fund’s endowment “is not available until 2033; From then on, the Fund may be used up to a maximum of a certain percentage of GDP.” “This path of growth and stability of the piggy bank of pensions is a very relevant indicator that reinforces the confidence and certainty of pensioners and workers, today and in the coming decades, in our public Social Security system,” provides the ministry.

“More inclusive and stronger” methods

In a press launch, which accompanies the report distributed this Monday, the OECD feedback that “the design and governance of funded pension systems must be improved to be more inclusive and stronger, guarantee better benefits for people and contribute to sustainable economic growth and innovation.” It is a crucial assertion, given the open debate in Western international locations, affected by the growing old of the inhabitants and growing stress on pension methods.

Along these strains, the OECD “urges new measures to be taken to address coverage gaps.” The report highlights the significance of “guaranteeing that people have access to an adequate retirement income and adopting innovative formulas, such as the mutualization of risks and the possibility of using the value of one’s own home,” signifies the OECD. According to specialists, retiring with out your personal house is a danger for pensioners, given the danger that pressure within the rental market (or mortgage, if fee has not been accomplished by then) limits the buying energy of the profit. It identifies “important gaps in pension coverage,” particularly “for self-employed workers and employees not covered by collective agreements.”

“Assets assigned to pensions in OECD countries grew by 10% in 2023, to exceed $56 trillion, a figure that more than triples the level of two decades ago. If public pension reserve funds are added, total assets rise to $63 trillion. The 2023 total is 5% lower than the 2021 level,” provides the OECD.