The demographic picture in Spain is similar to that in other European countries: a falling birth rate and rising life expectancy. Looking at the ratio of active to retired persons, there were 8.75 million pensioners in 2010. This is double the figure for 1980, and half of what is expected in 2040. It means that whereas there were four persons of working age for each person over 65 years in 2010, the ratio will be two to one in 2060. Spain is also experiencing delays in the age at which people enter the workforce, and seeing earlier exits from employment.
The main changes
In response to these challenges, the new legislation introduces:
- A rise in the real age of retirement, moving gradually from 65 years to 67 years, or to 65 with 38.5 years of contributions
- An increase in the number of years of contribution needed to obtain a full retirement pension, rising gradually from 35 years to 37 years
- An extension of the computation period for calculating pensions (changing gradually from the last 15 years to the last 25 years)
- Alterations to the scale for obtaining 100% of the pension
Debate over the public health service
Spain’s free universal system, financed by regional governments, represents the second largest government expense after pensions. With the economic crisis causing a sharp fall in the collection of taxes, and the growing difficulty of financing the public deficit, the debate on the sustainability of the health system has become even louder.
Some of the measures under discussion to improve the situation are: co-payments, fewer public hospitals and primary care centres, reduced benefits and coverages, and the rationalization of expenses and personnel.
Building up the second and third pillars in Spain
A document approved by the Congress of Deputies recommends that social security should be supplemented on a voluntary basis by other savings and social protection systems, both individual and group, in order to enhance the benefits from the public system.
Under the recently approved act, within a timescale of six months, the government must report to Congress on the development of supplementary social provision, and measures to further promote this in Spain.
So far, the second and third pillars continue without the support of government incentives, although insurers are calling for:
• Clear communication to citizens on the limits of the public system
• Tax incentives for employees and businesses
• Greater flexibility in terms of investments and instruments
• Freedom to make higher insurance contributions
On the subject of health, there is room for measures such as the private management of hospitals financed by public funds, and tax deductions for health insurance policies.
VidaCaixa is the Spanish life insurance market leader in terms of managed funds. Despite the lack of support from government to encourage the second pillar, which has resulted in a local market that is clearly stagnant, VidaCaixa has captured a growing market share of risk and savings plans, with particular success in gaining new tax-qualified pension funds. Please contact VidaCaixa to discuss how the new social security regulations will affect your local employee benefit plans.
For more information
please visit www.vidacaixaprevisionsocial.com
or contact Ms. Ana Delgado
Phone: +34 93 227 89 57