Spain's pension expenditure has seen a considerable increase, surpassing that of the Eurozone, despite a slower aging demographic.

In 2018, Spain's spending on pensions—encompassing retirement, widowhood, orphanage, and disability benefits—stood at 14.23% of GDP, which was one percentage point lower than the Eurozone average.

By 2023, this figure has risen to 15.13%.

In absolute terms, pension spending increased by approximately 48.3 billion euros from 2019 to 2023, marking a 27% rise over the four-year period.

This rate of increase is notably higher than the Eurozone average and double that of several countries, such as France.

The context of this surge in pension spending is influenced by Spain's recent indexation of pensions to the Consumer Price Index (CPI), which took place ahead of a rising inflationary crisis.

The result has placed pressure on public finances, restricting the government's ability to allocate resources to other areas, including national defense, which is facing a budgetary increase of about 8 billion euros.

Despite Spain's relatively moderate aging population—20.4% of residents are over 65 compared to 22% in the Eurozone—the country is facing structural changes in pension spending.

The aging demographic is projected to shift significantly in the coming decades, leading to further increases in pension expenditure.

Spain currently ranks third in the Eurozone in the percentage of the population aged between 50 to 64 years, a demographic that is expected to retire within the next 15 years.

This group constitutes 22.1% of the population, slightly above the Eurozone average of 21.5%.

This demographic trend indicates that Spain is transitioning into a phase of rapid pension expenditure growth, similar to that experienced by larger European countries in recent years.

The government's ambitious pension reform in 2020 aimed to protect the generosity of the public pension system.

This reform not only sustained a replacement rate above 60%—indicating that retirees receive approximately 65% of their last salary—but also legally ensured pension adjustments for inflation, a privilege not extended to other social groups in Spain.

As of 2025, the average pension has surpassed 1,300 euros, with retirement pensions averaging around 1,500 euros.

This increase has positioned pensioners as a significant consumer group, impacting public spending priorities and influencing electoral outcomes.

Next week, Spain's Fiscal Authority (AIReF) will scrutinize the ongoing impact of the pension reform.

A report mandated by European authorities will assess potential budgetary discrepancies.

Should the authority identify exceedances in expenditure, measures may be taken to control the deficit, affecting pension spending directly.

Overall, while Japan and parts of Europe have already encountered pressures from aging populations, Spain's current increase in pension spending is uniquely marked by its demographic context and further complicates the fiscal landscape as it navigates potential reforms and budgetary management.