The Foundation for Applied Economics Studies (Fedea) published this Thursday a study on the financial situation of the contributory component of public pensions in 2023, in which it estimates that these pensions presented a deficit of almost 56 billion euros last year, 3.8% of GDP.

Specifically, it estimates that the contributory component of the public pension system, defined as the sum of Social Security and passive classes, would have had a deficit in 2023 equivalent to 3.8 points of GDP (-55,919 million euros) if only would have the ordinary net income from social contributions.

To address this difference between income and expenses, the public pension system made available in 2023 State transfers worth 3.1 points of GDP, about 44,148.12 million euros, with an increase of 1.8 points of GDP since 2018, and a State loan worth 0.7 points of GDP, that is, 10,003 million euros.

Fedea points out that these transfers reduced the resources available to cover other “important public needs”, and adds that the financial situation of this component of the pension system, whose spending absorbs 13.1% of GDP and almost 30% of total public spending , is the subject of “continuous debate” in society.

The Social Security System, which includes the pensions managed by this institution, ended 2023 with a deficit very similar to that of the previous year, 0.6% of GDP. This percentage increases by two tenths, up to 0.8% of GDP, if the contributions destined to the Intergenerational Equity Mechanism (MEI) are excluded from current income, as it is an income not available to pay current pensions since it is enters a reserve fund that will only be available from 2032.

Additionally, Social Security has made available two specific transfers from the State worth 27,231 million euros (1.9% of GDP), one for the payment of supplements for minimum pensions (7,345 million euros), and the second, much higher in amount, destined to pay the so-called “improper expenses” (19,886 million euros).

Excluding these transfers, and focusing only on the contributory balance of the Social Security system, this would be around 2.7% of GDP. To this we would have to add, finally, another 1.2 points of GDP in State transfers for the payment of pensions for passive classes to reach a contributory deficit of 3.8 points of GDP, which must be financed with debt and with general taxes.