INCREASED public spending for aid against Covid-19 jeopardises public pension funds
The Pensions Outlook 2020 report by the Organisation for Economic Cooperation and Development (OECD) indicates that the increase in public spending during the coronavirus pandemic could affect Spain’s ability to fund state pensions.
“Expanded coverage of job retention schemes and unemployment benefits have reduced the transmission of the labour market decline to public pension rights, but recently accumulated debt will add pressure on pension finances, already strained by demographic changes”, indicates the study.
The grim news was followed by the OECD’s recommendation that governments encourage private pension funds and ensure “that people continue saving for retirement”
However, the recommendation that people focus on private pension plans clashes squarely with the Government in the case of Spain, as the executive of the coalition of PSOE and United We Can greatly limit tax incentives for saving for retirement at the individual level. The measure is included in the General State Budgets of 2021 and plans to reduce the annual deduction in personal income tax from €8,000 to €2,000 in individual private plans.
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