Andorra's Social Security Reports Q1 Deficit as Benefits Outpace Contributions

Andorra's Social Security Faces Rising Benefit Costs Despite Strong Contributions

The Andorran Social Security Fund (CASS) has flagged concerns over rapidly growing benefit payouts outpacing contribution income in the first quarter of 2026. While revenues rose 8.6% to €118.88 million across its general and retirement branches, expenses climbed 13.1% to €121.31 million, creating a €2.43 million deficit—reversing a €2.27 million surplus from the prior year.

Employment trends supported higher inflows. Salaried workers reached a near-record 51,650, up 2% from March 2025, while self-employed contributors hit 9,381, a 4.9% increase. Officials attributed the revenue boost to rising wages, higher contribution bases, and growth in high-value services. The general branch saw 9.1% revenue growth to €57.7 million, but payouts surged 15% to €66.24 million—including €43.9 million in medical reimbursements (+11.3%) and €22.5 million in sick leave benefits (+6.9%)—yielding an €8.54 million shortfall covered by government transfers.

The retirement branch performed better, with €61.18 million in contributions (+8.1%) against €47.3 million in pensions (+10.8%), delivering a €10.6 million surplus—exceeding the full-year budget projection of €18 million. Of this, €4.6 million has already moved to reserves.

CASS described the spending-revenue gap as a "warning signal," urging close monitoring to determine if it is temporary or structural. Projections suggest contributions will moderate to 5-7% growth for the year, tempered by slower GDP expansion, labour shortages, the EU's Entry/Exit System, Middle East tensions driving inflation and higher interest rates, offset partly by wage indexation and tourism.

In positive developments, the retirement reserve fund hit a record €2.0865 billion as of 30 June, up €118.1 million from end-2025 and €35 million from May. Year-to-date returns stood at 5.3%, with 10.2% over 12 months, beating inflation. Since 2012, annualised performance exceeds Andorra's IPC by 1.5%—a historic high—with cumulative gains of 57.5% against 29.8% inflation. The portfolio allocates 59% to fixed income and cash equivalents, 31.9% to equities, and 9.1% to other assets. Growth stems from €698.4 million in CASS surpluses and €475.7 million in investment returns, achieved amid geopolitical volatility from the Middle East conflict.

CASS emphasised tracking quarterly trends, particularly if double-digit benefit growth persists, to avoid widening imbalances.