The unfinishable reform of the spanish pension system

Abstract

The objective of the paper is to analyse where the proposed reforms for the Spanish pension system are leading in 2021, as well as to quantify their economic impact, both in terms of cash and actuarial value. The measures analysed are the following: The revaluation of pensions with the Consumer Price Index, instead of the Pension Revaluation Index. Modification of 288 coefficients to anticipate retirement and change in the calculation formula for volunteers. Modification of the bonus coefficients for delayed retirement and replacement by a “check”. Repeal of the Sustainability Factor and replacement by another Intergenerational Equity Mechanism. Supplement to improve retirement pensions for beneficiaries with at least 44 years and 6 months of contributions who have agreed to retirement early between January 1, 2002, and December 31, 2021. Financing of part of the protective action in compliance with the principle of source separation: State Transfers will be made to finance a significant number of items. The methodology used is based on financial and actuarial valuation methods, combined with the use of aggregate data from Social Security, as well as microdata from the Continuous Sample of Working Lives, which is provided by Social Security itself. The main results of the quantitative analysis show us that the reform goes in the opposite direction to what is desired, because it worsens financial sustainability, it does not improve equity, although it supposes the maintenance of the purchasing power of pensions.