An aging population and longer life expectancy are threatening private and public pension system. The systems will have to unite if they both want to survive and ensure that citizens continue to receive their retirement checks. Finance has ruled out using tax reforms to create a retirement fund that savers could use to store various financial products that would complement their state retirement benefits.
Tools like this already exist and work in the United States and the United Kingdom. The Spanish pension system needs to encourage consumers to start saving on their own for retirement. The Toledo Pact addresses the issue, but it has been a taboo topic for subsequent administrations. Perhaps because they dare not explain to the Spanish people that a rising number of retired workers will see numbers falling on their retirement checks?
The cuts have already started as benefits packages untied to inflation start to get reassessed annually and the legal retirement age is pushed back to 67 years. These changes will peak in 2019 when the pension system starts considering a person?s life expectancy after retirement to calculate how much money they will receive per month.
Evidence suggests that pensions will start to cover a smaller and smaller part of the salaries that retirees earned when they were working. To keep their standards of living the same in the future, workers will have to save more now. The government needs to tackle this issue, and workers have a vested interest as well because they, active workers, are the ones that feed the system. Finance should figure out an alternative to lowering pension checks. This is small potatoes when what we really need is a massive reform that helps Spaniards save for retirement.
