- AIReF has published its study on the pension expenditure rule, in which it confirms the conclusions reached in 2025 and once again highlights the design flaws of this rule, which is not an adequate indicator of sustainability
- The study incorporates AIReF’s long-term sustainability analysis, based on its own methodology, thereby providing a comprehensive view that goes beyond formal compliance with the rule and takes into account the expected trend in revenue, expenditure and public debt
- In the study, AIReF finds that net pension expenditure stands at 13.0% of GDP on average over the 2022–2050 period, below the 13.3% threshold laid down in the current legislation
- However, compliance with the rule is compatible with an upward debt trajectory, with debt reaching 123% of GDP in 2050 under a no-policy-change scenario
- AIReF reiterates that the pension expenditure rule provides only a partial view focused on a single component of expenditure
- It notes that the rule does not incorporate the most recent information on Spain’s demographic, economic and fiscal situation
- It also underlines that the rule is not aligned with the new European fiscal framework
- In view of these design flaws, AIReF proposes reforming the rule so that it is integrated into the European fiscal framework and more closely linked to the sustainability of public finances
The Independent Authority for Fiscal Responsibility (AIReF) today published its study on the pension expenditure rule, in which it confirms the conclusions of its 2025 statement and once again finds that the rule is formally complied with.
However, the institution also incorporates its long-term sustainability analysis of General Government and warns that compliance with this rule does not guarantee the sustainability of public finances.
The study was prepared in response to the additional mandate given to AIReF to update the analysis carried out in 2025 by incorporating the latest macroeconomic data and the available information on revenue. That mandate has ultimately taken the form of a study in which AIReF once again analyses formal compliance with the expenditure rule laid down in the current legislation and, in addition, updates its long-term sustainability analysis of General Government in accordance with its own methodology. AIReF thus provides a comprehensive view that goes beyond compliance with a single indicator and incorporates the expected evolution of revenue, expenditure and public debt, with the aim of contributing useful information for decision-making on fiscal policy and the sustainability of public finances.
The expenditure rule compares projected average pension expenditure over the period 2022–2050, net of the impact of the revenue measures approved to strengthen the system, with the 13.3% of GDP threshold laid down in the legislation. If the resulting net expenditure falls below that threshold, the rule is formally complied with. AIReF need only estimate the impact of the revenue measures on the 2022–2050 average and determine whether the expenditure estimated for the same period in the European Commission’s Ageing Report, updated with the observed data, minus the impact of those measures, exceeds 13.3% of GDP.
In the study, AIReF concludes that the pension expenditure rule is once again formally complied with. With the new information available, pension expenditure net of revenue measures stands at 13.0% of GDP on average over the period 2022–2050, 0.3 percentage points below the 13.3% threshold laid down in the second additional provision of Royal Decree-Law 2/2023.
This result represents an improvement of almost 0.2 percentage points compared with the previous statement, reflecting a higher estimated impact of the revenue measures adopted to strengthen the system. Specifically, gross public pension expenditure remains at 14.6% of GDP on average over the period 2022–2050, after incorporating the observed GDP and pension expenditure data for 2024 and 2025, while the revenue measures have been revised upwards to 1.6% of GDP on average over the same period.
AIReF maintains its estimate of the impact of the measures compared with its previous statement, except in the case of the reform of self-employed workers’ contributions, which is now estimated on the basis of the actual net income declared in 2023 and 2024, rather than the estimates included in the first statement. As regards the regularisation of immigrants, the study carries out an analysis subject to a high degree of uncertainty and estimates an almost nil impact on average over the long term.
Sustainability risks in public finances
The study also confirms the conclusions on the long-term sustainability of public finances set out in the 2025 Opinion. AIReF underlines that formal compliance with the pension expenditure rule does not mean that pressures on the sustainability of public finances have disappeared. Under a no-policy-change scenario in which fiscal rules do not operate, debt would embark on an upward path over the long term, driven by the ageing of the Spanish population, thereby exacerbating the vulnerability of public finances. After updating its demographic, macroeconomic and fiscal projections, this scenario places debt at 123% of GDP in 2050.
The new projections incorporate a larger population as a result of immigration, a lower fertility rate and a slight improvement in potential growth. Even so, population ageing will continue to put pressure on public spending, particularly pensions, healthcare and long-term care.
Design flaws in the rule
AIReF identifies design flaws in the expenditure rule that the institution has repeatedly highlighted in the past. First, the pension expenditure rule is based on a partial view of sustainability, limited to pension expenditure as a share of GDP and to an imprecise definition of revenue measures. The rule’s reference values are not linked to the sustainability of public finances, as shown by the fact that compliance with the rule is compatible with rising debt in the coming years. In addition, AIReF estimates that, in order to finance the expected increase in pension expenditure, implicit transfers from the rest of the Social Security Funds or from Central Government will have to rise by 2.3 percentage points to reach 3.0% of GDP. Without additional measures, this increase would reduce the resources available for other expenditure policies or require recourse to borrowing, which appears difficult to reconcile with the requirements and commitments of the European and national fiscal frameworks. Ultimately, this partial approach contrasts with a comprehensive view of sustainability that takes into account the full set of revenue and expenditure flows and the resulting path of public debt.
Second, the design of the rule, linked to the projections in the European Commission’s Ageing Report, prevents the incorporation of the latest information on the public pension system and the economy more broadly. Specifically, it continues to rely on the projections in the Ageing Report published in 2024 (AR2024), even though a new edition of the report is already scheduled for 2027. In fact, Eurostat has already published its new demographic projections (EUROPOP2025), which will serve as the basis for the new report and differ substantially from the previous set (EUROPOP2023).
Third, the pension expenditure rule is not aligned with the new European fiscal framework. On the one hand, the new framework takes the level of public debt as its anchor, whereas public debt is not taken into account at any point in the design of the pension expenditure rule. On the other hand, it identifies primary expenditure net of revenue measures, defined in terms of annual and cumulative growth rates, as the key oversight variable, whereas the pension expenditure rule is expressed as a percentage of GDP.
For this reason, AIReF proposes that the Ministry of Inclusion, Social Security and Migration reform the pension expenditure rule so that it is more consistent with the sustainability of public finances and with compliance with the commitments of the national and European fiscal frameworks. Specifically, it proposes that the rule be expressed in terms of growth rates of primary expenditure net of revenue measures for the Social Security Funds and that it be incorporated into the commitments of the Medium-Term Fiscal-Structural Plan. AIReF could assess the feasibility of these commitments in advance and independently, together with the rest of the Medium-Term Fiscal-Structural Plan.
