Pablo Hernández de Cos analyses the future of pensions in the third seminar on “Structural Challenges of the Spanish Economy”

Last Wednesday, 19 March, CUNEF Universidad hosted the third seminar of the series “Structural Challenges of the Spanish Economy”, given by Pablo Hernández de Cos, former Governor of Banco de España (2018-2024), incoming Managing Director of the Bank for International Settlements (July 2025) and CUNEF alumnus. In this seminar, held in the Auditorium of the Almansa Campus, Mr  Hernández de Cos analysed the future of Spanish pensions and highlighted some key insights:

• Spain spends around 11% of its GDP—3 percentage points above the OECD average—on pensions, distributed as follows: retirement (70%), surviving spouses (18%), permanent disability (10%) and orphans (2%).
• The average labour market exit age in Spain, 62, is low compared to the OECD average, which is 64.4, regardless of the fact that the legal retirement age is above average (67 in Spain compared to 64 in OECD countries).
• Spain’s initial pension/final salary ratio is high (82.2%, compared to the 60% OECD average). Additionally, the average pension/average salary ratio is also high.
• Demographic projections create a high sense of uncertainty. The increase in pension spending could vary between 9.9 and 14.7 percentage points in 2060, applying an 80% confidence interval to UN estimates.
• A 60-80% employment rate in 2060 could reduce pension spending by between 1.5 and 6.7 percentage points of GDP. However, this goal is ambitious, as activity rates tend to fall as populations age, and high structural unemployment rates add even more pressure.
• Sustaining the replacement rate long term would require a significant increase in resources, even in relatively favourable scenarios.
• According to the report on ageing published by the European Commission, an increasingly ageing Spanish population could lead to an surge in public spending of around 5 percentage points of GDP until 2070, not only on pensions, but also on the health system.
• Private savings must play an important role to complement the benefits offered by the public pay-as-you-go system and thus face the future challenges posed by Spain’s ageing population.