In all countries, the main factor that determines senior citizens’ financial circumstances is the pension system and its ability to meet their needs, both in terms of the population that receive pensions and the amount paid in relation to the income of the rest of the population. Senior citizens may also have other forms of income such as from work or savings. In practice, however, it is a reality that most senior citizens quit the labour market at retirement age or even before. In all European countries, pensions are the main source of income for this collective, though there are some differences between countries and at different moments in time. Moreover, income from capital, which is normally only recorded in a limited manner in databases on households, generally represents only a small percentage of senior citizens’ total income.
Pensions are, therefore, the main factor governing the degree to which the social needs of senior citizens in Spain are met. One key factor is the connection between the number of people aged over 65 (until recently the legal retirement age) and the number of people in this group who receive pensions. As the population has aged, the number of pensioners has increased. However, the peaks in the growth of the system have coincided with institutional changes that have made its expansion possible, such as the inclusion among beneficiaries of people with minimum retirement periods or taking early retirement as part of industrial restructuring processes. Also notable is the fact that, unlike what occurred in the 1990s, in recent times the gap between the number of senior citizens and the number of people receiving pensions has gradually grown.
Turning now to the issue of the relative generosity of pensions and benefits, the central question is the extent to which pensions have kept up with the rate of the rise in average income in Spanish society. It is to be expected that during periods of economic growth, the gap would widen, since the rise in the pension amount payable does not depend on factors of a cyclical nature, and that the opposite would occur in recessions, given the stability of pensions and the presumable fall in the incomes of the rest of the population.
As shown by the figure, the relationship between the two variables is not only determined in Spain by factors of an economic nature, although these are important in any changes. The minimum retirement pension, for example, began to grow faster than monthly GDP per capita when the boom prior to the economic crisis had not yet come to an end. This was due to the decision to increase the sums paid. With the downturn in economic activity and the continuation of the crisis, pensions grew much faster than the economy, with this process reversed in the final phase of economic recovery.
In the case of non-contributory pensions, the financial protection of last resort for senior citizens unable to access the contributory pension system, this process has been much more pronounced, with a value in relation to per capita GDP now much lower than at the start of the economic crisis. If we broaden the timeframe of the analysis, we find that this relationship is today lower than when the system was set up in the early 1990s. In other words, non-contributory pensions have declined in purchasing power since they were created.
A final indicator that shows the capacity of monetary pensions and benefits to meet social needs is the effect they have on the incidence of poverty among senior citizens. In all countries without exception, as a result of the way this effect is measured – by comparing the poverty that would exist without these pensions and benefits with the poverty that really exists – the impact of monetary pensions and benefits is higher in the case of senior citizens. Spain in particular stands out, as it is the country in the EU where the difference between the effect of this set of pensions and benefits for the entire population and for senior citizens is greatest, with a clear advantage of favour of senior citizens. This effect is due almost exclusively to pensions.
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