Everything I Wanted To Know About Pensions And Didn’t Dare Ask

pensions spain

All those who are interested, worried or stressed about their future pensions can read an excellent article from an expert, Niko Garnier. It is a really illustrative piece which defines all the decisive factors, the first of which is demographics. If they fail, if the economy doesn’t grow and employment stagnates, then there is no difference at all between the pay-as-you go system (Spain’s current state pension system) and the capitalisation scheme (put forward as a miraculous solution, now used in private pension schemes).

Inter-generational solidarity is the big stop-gap for difficult times, and not this or that technical scheme of actuarial calculation. And please, above all, don’t be frightened by this bugbear invented by the press, namely the Pensions Fund, which is totally insignificant for their future. The pay-as-you go pensions system depends on the state’s resources, on taxes and, if needed, as Niko says, on the capacity for indebtedness believing that the current negative problems will be sorted out. This doesn’t mean that sometimes pensions need to be adjusted to be sustainable, but their existence is not in danger. The Fund is no more than a drop in the ocean of the anual spending on pensions. The Social Security does not pay them, it’s the State via taxes.



About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.