Sustainability and Adequacy of the Spanish Pension System after the 2013 Reform: A Microsimulation Analysis

Abstract

Concerns about the consequences of demographic ageing on the sustainability of the pension system has led to the adoption of reforms reducing pension expenditure. However, the impact of these reforms on pension adequacy is now coming under increasing scrutiny. Taking recent Spanish reform as an example, this paper analyses the extent to which fostering pension sustainability threatens pension adequacy. Using an extension of the DyPeS behavioural microsimulation model, results show that the introduction of mechanisms linking retirement pensions to the evolution of the social security budget balance has strong and negative effects on adequacy. The gains in sustainability are mainly driven by the significant fall in the benefit ratio (average pension to average wage), worsening the relative economic position of pensioners throughout forthcoming decades, reversing the past trend.

Longevity trends in entrepreneurial activity. An analysis of the characteristics of senior entrepreneurship in Spain

“…On the other hand, the 2013 reform introduced two system adjustment factors: the sustainability factor, which linked new pensions to the evolution of life expectancy; and the annual pension revaluation factor, linked to the evolution and sustainability of the system (Solé et al. , 2019).…”

“…In Spain, the literature has highlighted the need to continue reforming the system in the long term, despite the reforms carried out in recent years(Meneu et al, 2018; Alonso-Garc ıa and Rosado-Cebrian, 2021).However, the reforms implemented in 2011 and 2013 brought about very important changes in the pension system. Thus, the 2011 reform introduced changes in the replacement rate and in the period for calculating pensions, the delay in the retirement age and a transition period was established (Conde-Ruiz and Gonz alez, 2016).On the other hand, the 2013 reform introduced two system adjustment factors: the sustainability factor, which linked new pensions to the evolution of life expectancy; and the annual pension revaluation factor, linked to the evolution and sustainability of the system(Sol e et al, 2019). This is why these reforms are considered to have influenced the entrepreneurial decisions of senior professionals who decided to change their professional career or who were forced to do so.…”

Analyzing How the Social Security Reserve Fund in Spain Affects the Sustainability of the Pension System

“…In this respect, too, Díaz-Gimenez and J. Díaz-Saavedra (2017) applied an overlapping generations model with endogenous retirement in their analysis of the 2011 and 2013 reforms. Subsequently, Solé et al (2019) employed a microsimulation behavioural model to assess the sustainability and adequacy of the Spanish pension system following the 2013 reform.…”

“…Fourthly, Roch-Casellas et al ( 2017) assessed methodological aspects of the "sustainability factor" (i.e., linking the amount of new retirement pensions to changes in life expectancy) and the "annual revaluation index" (concerning the evolution of the Social Security balance, for all public pensions) which were introduced under the pension reform of 2013. In this area, too, Solé et al (2019) used a dynamic, time-based, behavioural microsimulation model to analyse the impact of the same reform on the sustainability and adequacy of the system. These authors concluded that the introduction of these adjustment factors had had strongly negative effects on the adequacy of pensions, but represented a major step towards enhancing sustainability.…”