SPAIN - Pension reform is needed to ensure long-term fiscal sustainability and there is no room for complacency, an International Monetary Fund (IMF) staff mission to Spain has reported.
The IMF said the onset of the rising costs of ageing would be larger than elsewhere, even taking into account Spain's “immigration phenomenon”. This onset was now only 10 years away, it warned.
According to the IMF, the continued reform delays would only raise the size of the measures that would eventually be needed.
It welcomed the submission of the Spanish government's proposals in November, but urged for discussions to now proceed expeditiously.
“Reform measures will need to be broad-ranging, encompassing also an extension of the base period used to compute pensions,” it advised.
With regards to Spain’s recent tax reform, the IMF warned the reduction in tax-exempt contributions to private pension plans could send out a “deterring signal” because such changes might instil uncertainty about future tax treatment.
“The private pension pillar is still small in Spain, but its recent growth is encouraging and needs to be nurtured,” it said.
By Lisa Haines
Industry Voice: Sponsored by Eaton Vance
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