Spain is at the bottom among the countries of the Organization for Economic Cooperation and Development (OECD) in terms of the size, both estimated in dollars and as a percentage of GDP, of the reserves of the public pension system, which is known as the Fund. Social Security Reserve or popularly pension piggy bank.
According to the report Pension Markets in Focus 2024 published this Monday by the organization that brings together the most industrialized economies, which manages data at the end of 2023, the pension piggy bank It would amount to about 6,000 million dollars (5,672 million euros), which would be equivalent to 0.4% of GDP.
However, as indicated in October by the Ministry of Inclusion, Social Security and Migration, it is expected that the Social Security Reserve Fund will close 2024 with close to 9,300 million euros, after ending September with 8,356 million euros, “the level highest since December 2017”, thanks to the Intergenerational Equity Mechanism (MEI), which came into effect in 2023.
The MEI is a percentage of the contribution for common contingencies, distributed between the company and the worker with the same distribution as in social contributions, whose objective is to increase the resources of the Reserve Fund.
“Spain had the lowest reserves (both in dollars and as a percentage of GDP) among the reporting countries,” states the document, which highlights the United States as the country with the largest amount of the public pension reserve fund in the OECD. in 2023, with 2.6 trillion dollars (2.46 trillion euros), the equivalent of 9.7% of the US GDP. For their part, South Korea and Japan had the largest amounts of PAYG plan reserves in relation to the size of their economy, with 46% and 38% of GDP respectively.
In this sense, the OECD states that the reasons for differences in the size of reserves could include the date of introduction of the reserve fund, its mission, any limit or objective on size and the date of exhaustion.
Likewise, regarding assets in the private sector, in the case of Spain they would amount to 180,000 million dollars (170,166 million euros) or 11.2% of GDP, in the lower part of the OECD countries in terms of to the proportion of funds with respect to the size of the economy.
In this case, the US also has the largest amount of assets, with almost 39 trillion dollars (36.86 trillion euros), almost three quarters of the amount of all OECD countries, although in proportion to GDP the first Place is occupied by Denmark, with 198%, ahead of Iceland, with 181.8%, and Switzerland, with 159.8%.
“There are large differences in terms of assets of pension providers between countries,” notes the Paris-based institution, adding that those countries with the largest assets tend to be those with mandatory or quasi-mandatory pension systems, while that countries where pension insurance is voluntary or more recent the amounts are smaller, with some notable exceptions such as the United States.
In this case, the international organization highlights that in the United States, where people have been saving for retirement for several decades, pension providers had assets worth almost $39 trillion, representing almost 70% of all assets held by pension providers in the OECD area.
$63.1 trillion for pensions across the OECD
In the OECD countries as a whole, assets intended for retirement in 2023 increased by 10% compared to the previous year to stand at 63.1 trillion dollars (59.6 trillion euros), including 56.5 trillion dollars (53.4 billion euros) in private providers and another 6.6 billion dollars (6.2 billion euros) in public reserve funds, which represents respectively an annual increase of 10.8% and 3.1%.
Despite growth in 2023, assets were still 5% below their 2021 level in nominal terms in the OECD area, after large investment losses in 2022 incurred by pension providers and public funds following the rising interest rates and falling capital.
However, assets have more than tripled over the past two decades in the OECD, rising from $20.8 trillion at the end of 2003 to $63.1 trillion at the end of 2023.
Retirement assets grew in 2023 in almost all OECD countries except Luxembourg and Portugal, with the largest increase in pension provider assets seen in Turkey (73.3%), Poland (34.9%). %) and Lithuania (27%).
In a second report on pensions, the OECD warns that, in a context of population aging and other economic challenges, new measures are needed to address coverage gaps and highlights the importance of ensuring that people have access to adequate retirement income and adopting innovative approaches, such as risk pooling options and leveraging home equity.
“Pension systems are a cornerstone of the financial security and economic resilience of an aging population in many countries,” said OECD Secretary-General Mathias Cormann, for whom it is essential to have pension frameworks supported by more inclusive, innovative and sustainable assets that evolve with labor markets to improve people’s retirement outcomes and ensure the resilience of pension systems.
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