A Revision of the Revaluation Index of Spanish Pensions

Abstract

This article reviews the methodological aspects of the revaluation index of Spanish pensions developed following Law 23/2013 which regulates the sustainability factor and revaluation index of the Social Security pension system. From a gradual breakdown of the elements that make up the revaluation index, an exposition is given of the formal and implementation problems it involves. Finally, an alterna tive model based on dynamic optimization techniques is proposed and its use is illustrated with nu merical examples.

Continuous-time Optimal Pension Indexing in Pay-as-You-Go Systems

“…These new methods take into account economic and demographic variables to automatically establish a value of existing pensions so that expenditure matches available funds. For example, this is the case of the 2013 Spanish's pension reform, where each year the value of existing pensions is indexed according to the result of a formula meant to ensure a budget equilibrium (a comprehensive analysis of this aspect of the Spanish reform can be found in Roch et al, 2017). This interest has led researchers to build mathematical models to optimally control the indexing of pensions.…”