The Spanish pension system: population aging and immigration policy

Javier Vazquez, Universitat Autònoma de Barcelona

There is a widespread consensus in the literature that, as consequence of the demographic transition, the current Spanish pension system will become unsustainable in the next decades. We evaluate the sustainability of the pensions, taking into account the demographic projections by the Spanish-Statistical-Office. A baseline scenario is projected as well as several reforms are simulated, focusing on: selective immigration policy, changes in the way of fitting the pensions, and increase of the legal age of retirement up to 68. We obtain that the current system would not incur deficits until 2018. The expenditure in pensions practically would double (between 2005 and 2050). A selective immigration policy – towards young people – would help, but does not solve the long-term sustainability of the system. A policy that combines a pensions' growth inferior to productivity growth and extends the age of retirement up to 68 would give solvency to the system beyond 2029.