OECD Warns Spain’s Pension System Faces Unprecedented Strain from Aging Population

Introduction

The Organisation for a Co-operation and Development (OECD) has cast a spotlight on the profound demographic challenges confronting Spain, warning that a rapidly aging population is set to place unprecedented strain on its public pension system.

A Demographic Shift Decades in the Making

The foundation for Spain’s current demographic reality was laid over several decades. A significant factor has been a remarkable increase in longevity; since 1976, the average life expectancy at birth has surged by a full decade, rising from 73.44 years to over 84 years in 2024. While a declining birth rate has contributed to the aging trend, the OECD noted that in Spain, as in Italy and Denmark, the rise in life expectancy has been a much more dominant force.

This long-term shift is now converging with a more immediate event: the retirement of the large “baby boom” generation. As this cohort leaves the workforce, it is intensifying the pressure on Spain’s pay-as-you-go pension model, a system reliant on contributions from the current working population to fund the benefits of today’s retirees.

In a pair of reports released this week, “Economic Survey of Spain 2025” and “Pensions at a Glance 2025,” the OECD detailed the scale of the impending challenge. The organization projects that over the next 30 years, Spain will experience a 41% increase in its old-age dependency ratio—a measure of pensioners relative to working-age individuals. This growth rate is the highest among the world’s major economies and second only to Korea across the entire OECD. The reports also forecast that the pace of this change will be three times faster in the next quarter-century than it was in the last.

The economic consequences outlined by the OECD are significant. The organization anticipates that the aging trend will lead to a smaller labor supply and, consequently, slower economic growth. This, in turn, is expected to create mounting fiscal pressure. The reports calculate that Spain’s spending on pensions will grow from 13.7% of its GDP in 2025—already the third-highest share among 32 countries analyzed—to 16.9% by 2045, at which point Spain is projected to have the highest pension expenditure in the group. By 2050, the OECD estimates there could be nearly three people aged 65 or older for every five people of working age.

As of January 1, 2024, official data from Spain’s National Statistics Institute (INE) showed the country had 11.5 million people over 65, compared to 31.7 million aged 16 to 64, resulting in a national dependency ratio of 31%. This figure, however, masks significant regional disparities. In territories like Asturias, Castilla y León, and Galicia, the ratio already exceeds 40%, while in the Balearic Islands, Canary Islands, and Murcia, it remains below 25%.

In response to these demographic projections, the OECD put forward a series of recommendations. Among them was the suggestion to extend the period for calculating pension benefits to 35 years and to reintroduce a mechanism that automatically adjusts pensions based on changes in life expectancy. These measures were part of a broader proposal for a fiscal adjustment of nearly €7 billion aimed at putting the country’s public debt on a downward trajectory.

Conclusion

The Spanish government, however, has firmly rejected the notion that further reforms are necessary. In response to the reports, the Minister of Social Security, Elma Saiz, stated that the current system does not require additional measures. Her department also contested the OECD’s findings, asserting that the organization’s report contained “outdated” information because it did not incorporate the latest revisions to Spain’s GDP in its calculations.