The Spanish Public Pension System: Current Situation, Challenges and Reform Alternatives (El Sistema PPblico De Pensiones En Espaaa: Situaciin Actual, Retos Y Alternativas De Reforma

Cos, Pablo Hernández de; Jimeno, Juan F.; Ramos, Roberto

doi:10.2139/ssrn.2902554

Cited by 3 publications

(3 citation statements)

References 32 publications

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“…The small reduction of the payroll tax in the 2020's captures the effect of two reforms in 2011: increasing the number of years of labor income used to compute the pension, from the last 15 to the last 25, and increasing the legal retirement ages in one more year (see Appendix G for a description of the Spanish PAYG). 8 The already mentioned Díaz-Giménez and Díaz-Saavedra (2009) and Díaz-Giménez and Díaz-Saavedra (2017), as well as Rojas (2005), De la Fuente et al (2019), de Cos et al (2017) and García-Gómez et al (2020).…”

Section: Introductionmentioning

confidence: 94%

A Worker’s Backpack as an Alternative to PAYG Pension Systems

Díaz-Saavedra

Marimon

Sousa

2023

Journal of the European Economic Association

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Facing an ageing population and historical trends of low employment rates, pay-as-you-go (PAYG) pension systems, currently in place in several European countries, imply very large economic and welfare costs in the coming decades. In an overlapping generations economy with incomplete insurance markets and frictional labour markets, an employment fund, which can be used while unemployed or retired, can enhance production efficiency and social welfare. With an appropriate design, the sustainable Backpack employment fund (BP) can greatly outperform (measured by average social welfare in the economy) existing pay-as-you go systems and also Pareto dominate a full privatization of the pension system, as well as a standard fully funded defined contribution pension system. We show this in a calibrated model of the Spanish economy, by comparing the effect of its ageing transition under these different pension systems and by showing how a front-loaded transition, from the PAYG to the BP system can be Pareto improving, while minimizing the cost of the reform.

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Section: Introductionmentioning

confidence: 94%

A Worker’s Backpack as an Alternative to PAYG Pension Systems

Díaz-Saavedra

Marimon

Sousa

2023

Journal of the European Economic Association

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“…In a third approach, future scenarios have been mapped out and accounted for. For example, Herce (2003) examined the advantages of using ad hoc models for a better understanding of the fine structure of pensions programmes and formulae, while Hernández de Cos et al (2017) analysed the recent evolution of the pensions system and predicted the impact of the latest reforms.…”

Section: Literature Reviewmentioning

confidence: 99%

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

Gómez–Déniz

Pérez‐Rodríguez

Sosvilla‐Rivero

2022

Risks

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Faced with the need to adjust public pension systems to meet changing demographic, economic and social conditions, most developed countries have created government reserve funds to ensure macroeconomic sustainability. This paper aims to study the importance that this reserve fund plays in the sustainability of the Spanish public pension system. Using data for the 2000 to 2019 period (20 observations) on the main variables impacting on the system, we calculate probabilities and other indicators of its unsustainability in relation to the reserve fund. Our model accurately reflects certain aspects of the data, and suggests that the probability of unsustainability is inversely associated with the size of the reserve fund, but that this relation is moderated by the heterogeneity of the members of the pension system. Moreover, the probability of unsustainability increases in line with the pension system deficit, the time elapsed until unsustainability is reached is shorter when the Reserve Fund balance falls, and the size of this fund at which the system becomes unsustainable diminishes with the probability of unsustainability.

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“…From an aggregate point of view, pension expenditure expressed in relation to GDP depends on three types of factor [22]. The first of these is demographic in nature insofar as this expenditure is inextricably linked to retirement pensions and spending on pensions increases in line with increases in the size of the corresponding age group in relation to the working-age population (i.e., when the dependency ratio increases).…”

Section: The Pension Expenditure Indicatormentioning

confidence: 99%

Thinking in Vertical: A Practical Application of the Two-Stage Pension System in Spain

Devolder

Domínguez‐Fabián

2020

Sustainability

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Public pay-as-you-go pension systems are affected by sustainability problems due to the increasing longevity of the population. These problems come to light when there is unsustainable growth in pension expenditure in relation to GDP. The usual arrangement is for public systems to be complemented by private systems that provide a lifetime annuity paid alongside the public pension. This approach, which is horizontal in its way of thinking, is the one that all countries apply; in it, we can expect to find lifetime annuities, which are expensive because they have to take increasing longevity into account, as well as sustainability problems in the public accounts. Therefore, in this paper, we put forward a system that maintains the complementarity between private and public, but considers it from a vertical point of view. By this, we mean that over a certain period of time, the private system would provide the pension in the form of a temporary income, without the need to consider such a high longevity risk, and then in the following period, the public system would take over. We apply the model to Spain, one of the countries whose pension systems are most affected by problems of sustainability, and observe a decrease in the relationship between pension expenditure and GDP using this two-stage model as opposed to the current system, for the period 2025–2068. This decrease can be achieved without decrease of benefits, change in the retirement age or increase of the contribution level.

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The Spanish Public Pension System: Current Situation, Challenges and Reform Alternatives (El Sistema PPblico De Pensiones En Espaaa: Situaciin Actual, Retos Y Alternativas De Reforma

Cited by 3 publications

References 32 publications

A Worker’s Backpack as an Alternative to PAYG Pension Systems

A Worker’s Backpack as an Alternative to PAYG Pension Systems

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

Thinking in Vertical: A Practical Application of the Two-Stage Pension System in Spain

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