The Social Security payroll has to pay 9,190,000 retired workers around 8 billion euros. Even though accounts were frozen in 2011 and have been restructured since to better match the consumer price index, more and more retired workers are drawing on the fund.
The national retirement system's accounts have been hit hard by the economic downturn, but its biggest threat is structural. Baby boomers are starting to retire in Spain, and their life expectancy is longer than previous generations. Under these circumstances, it doesn't make sense that the Finance Ministry has started to tax savings and investment accounts (by doing away with a dividend tax exemption) and has not created a pure retirement vehicle. Waiting to come up with a solution will not erase the problem, but it will make it worse. Moody's said it well: this reform lacks ambition.
