The future of the Social Security pension system in Spain is the center of the debate of many economists who see an uncertain future due among other things, to which life expectancy has increased and there are more and more pensioners. Therefore, experts recommend to retirees to be advised, as the professor of the University of Barcelona said a few weeks ago, Gonzalo Bernardos. In this case, it is Natalia de Santiago (finance expert) who warns how important it is to start Save and invest years before reaching retirement age: “It’s an advantage.”
On this occasion, in the podcast of Claudio Nieto published on YouTube, he has analyzed the possible solutions to guarantee the viability of the pension system over the next few years. Because it has been seen, according to the population data of the INE (National Institute of Statistics), that birth is going down but that, instead, our elders have increased life expectancy. Therefore, there will be more and less workers quoting. There he has pointed out, shortly after starting, that in Spain you can live well with public pensions, because the system “is very good.” Of course, provided that “they have done their homework” how to finish paying the mortgage, for example, which usually means between 30% or 35% of the salary.
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An imbalance will be seen that could lead to a reduction in pensions in the event that no measures are taken. During the interview he points out that, when retirees lose purchasing power, “it has a lot of impact and people notice very fast.” “When you see that things are more expensive and the pension has not risen for two years in a row, complaints begin.”
“There are many retirees and they will complain very fast”
Natalia de Santiago explains that governments sometimes have it simple since the elderly do not usually understand how pensions are calculated. For them, to tell them about reducing percentages or coefficients is another problem, because they generally do not know and that makes them focus on seeing those increases in their pension payrolls. “Now there are many retirees and they will complain fast” in the event that they find some reduction or problem in their income.
It must be taken into account, yes, that this interview is published in October 2024, before the Application of the last rise in pensions. On the amount that is going to be charged, he states that “if when you retire you are going to collect half, you have to propose it very well to get the accounts knowing that more and more live.”
How much and when to start saving to gain tranquility in retirement
The finance expert compares to start saving soon for retirement like the one who says he wants to leave the sport for the end of the day, “that you do not do it.” “For example, when you charge 1,000 euros on the payroll, and you say that you are going to save 50 euros at the beginning of the month, it is not the same when it arrives on the 31st and you have 75. In this case, it seems that the same 50 euros are a lot of money.”
There are several tricks that always work as saving earlier than the month, “Save for you first and early is when you should decide whether you spend more or not.” Even so, Spain is still one of the European countries with the best public pension system. “We complain a lot, but Spain has some pensions that are not comparable to those of other countries around us. In others, the pension substitution rate, that is, the percentage of the salary that remains when you retire, is lower. In Germany it is around 50%.”
Increase life expectancy “7 years after retirement to 23”
At the time the pension system began, life expectancy was 7 years after retiring and is now 23. In addition, the replacement rate in Spain is higher than in other countries, and this means that in the event that no modifications or reforms are made in the pension system, a decrease in the amount of money that the elderly will receive in the future could be given.
Thus, they should look for other ways to save. To which we must add that, due to life expectancy, “we are going to see more people charging pensions and less working and two things can happen. On the one hand, those who are working must contribute more and their quotas to Social Security to rise, but above all it is expected that public pensions deteriorate.”
This dichotomy questions the sustainability of the pension system especially at the time the young people reach the retirement age. “The younger you are, it is more likely that the replacement rate is lower than there is now,” he said.
In addition, he has referred to an OECD report in which it is ensured that both Greece and Spain will be the countries most affected by the decrease in the replacement rate in the coming years “because it is where they are higher, they are now at 70-80% and they are expected to fall to 50 – 60%,” he said. “If fewer people have to pay pensions for more people, they will have to go down and the reality is that they cannot be maintained.”