SPAIN - The Spanish government's plans to raise the state retirement age from 65 to 67 have already run into fierce opposition, and pension consultants warn such a move could be difficult to enact.

Celestino Corbacho, Spain's minister of labour and immigration, made the surprise announcement last Friday (29 January), stating the move was necessary to guarantee the sustainability of the social security system beyond 2030.

His announcement also came soon after the National Statistics Institute published its long-term population forecast, which showed that by 2049, people aged 65 and over would have doubled in numbers, amounting to over 30% of the total population.

This, coupled with a reduction in the size of the working population, means there would be only 10 people of working age for every nine who were economically inactive - those who are aged under 16 or retired.

Spanish state pensions are earnings-related and payouts average close to 90% of final salary on earnings up to the social security salary cap of €38,376, while company schemes act as a supplementary pension rather than as a main source of income.

However, trade unions have been hostile to the government's proposal and the CCOO, Spain's biggest union confederation, has already announced plans for a week of nationwide demonstrations beginning on 22 February.

Pension fund consultants are also sceptical about the prospect of changing pensions policy.

"In the short-term, it will be difficult to raise the retirement age," said Aitor Corral, a senior associate at Hewitt.

"It could be a positive measure but the socialist government is in a weak position and, with most of the business sector opposed to its economic policy, the prime minister needs the support of the unions, which are against the increase."

He continued: "On Friday [29 January], Corbacho was announcing this as Government policy, but by Monday [1 February] he had backtracked and it was only a proposal, according to the Economy Ministry."

Similarly, Eduardo Jauregui, partner at Mercer, said: "No-one knows why they are doing this now, when there are so many economic problems in Spain, and high unemployment means jobs are hard to come by."

Jauregui said the government was also thinking of increasing the number of years used as the earnings base from 15 to 25, in turn reducing the state pension paid, but this idea has been discarded for now.

"No-one knows if the increase in retirement age will go through parliament, but it will be an uphill battle for the government," said Jauregui.

"If it is not passed, it will probably come back two or three years from now. It is inevitable that it will go through eventually."

Were the change to take place soon, said Jauregui, company pension scheme members would not receive a state pension until the age of 67 and might have to make additional contributions to fund payments for those two additional years, since many DB schemes are linked to the state pension.

Despite protests at home in Spain, the OECD has voiced its support for the proposed measures. It has also called for additional reforms such as a link between the retirement age and life expectancy, an increase in the effective retirement age and suggested benefits should be computed using data on a person's entire working life. It said there should also be a clearer policy to expand contributions to private pensions.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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