[7] Introduced under the Law on Pension Plans and Funds in June 1987, private schemes had assets totaling 7% of GDP in 2010.
It was created as one of the recommendations of the tri-partite Toledo Pact of 1995 between government, employers and trade unions.
A growing and ageing population and a declining fertility rate are two sources of significant strain upon Spain's public budgets and finances, as the public pension system had to rely upon a smaller productive population to contribute enough taxes to compensate for a growing demographic of elderly retired workers who would be withdrawing from their pensions, living for longer periods of time, and would likely be in need of costly health services.
[14] In light of these demographic trends challenging the sustainability of Spain pension system, reforms and austerity measures have sought to reduce the generosity of the state's pension benefits and create incentives and changes to keep older workers in the labor force for a longer period.
[15] One of Spain's key reforms to implement this policy is to increase the retirement age from 65 to 67 over a number of years, but this change will occur gradually over a 14-year period that started in 2013 and will end in 2027.
The retirement age will increase by a month and a half each year up to the end date, and is being conducted in a staggered manner to make the change less disruptive to the population.
Legal retirement age in the case of voluntary unemployment will require 35 years of contributions.
Prior to the implementation of this reform, partially retired workers only contributed proportionally based on the amount of time they worked.
[16] Pension reforms will also address the needs of the family by covering maternity and paternity periods with up to three years of leave of absence for childcare, and in the case of maternity, a supplement will apply to contributory pensions for retirement, widowhood, and permanent disability as of 2016.
This additional percentage of contributory pension will increase to up to 15% depending on the number of children;[17] this is one incentive to address the issue of Spain's current fertility rate, and how Spanish women tend to have their first child relatively late in life compared with other European countries.
To see that these measures continue to be implemented, a committee will be appointed to report on the sustainability of the pension system in a periodic manner.