The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain?
The reform of 2013 represented a qualitative leap in the reform of the Spanish pension system. Unlike its predecessors, it introduced two automatic resetting mechanisms similar to those of other European countries. The first is the sustainability factor, scheduled to come into effect in 2019 but del...
| Main Authors: | , , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2020-12-01
|
| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/8/4/134 |
| _version_ | 1827700594164367360 |
|---|---|
| author | Enrique Devesa Mar Devesa Inmaculada Dominguez-Fabián Borja Encinas Robert Meneu |
| author_facet | Enrique Devesa Mar Devesa Inmaculada Dominguez-Fabián Borja Encinas Robert Meneu |
| author_sort | Enrique Devesa |
| collection | DOAJ |
| description | The reform of 2013 represented a qualitative leap in the reform of the Spanish pension system. Unlike its predecessors, it introduced two automatic resetting mechanisms similar to those of other European countries. The first is the sustainability factor, scheduled to come into effect in 2019 but delayed until 2023, and its ultimate reversal cannot be ruled out. The objective of this study was to quantify the savings, or the lowest expenditure, that can be achieved in the Spanish public contributory pension system by applying it. These savings are measured in terms of cash—of annual expenditure—and in terms of accrual by calculating its present actuarial value. Combining these two methods is one of the contributions of this work. This work was only intended to analyze the impact of the Sustainability Factor, therefore, it did not take into account the impact of the Pension Revaluation Index, which is the second mechanism introduced in the reform of the pension to 2013. An ad hoc projection method was used, combining microdata from the Continuous Sample of Working Lives (MCVL), aggregate data from the pension system, the financial-actuarial projection method, and actuarial techniques. The diversity of the data used is the second contribution of this work. The application of the sustainability factor would improve the viability of the system, since the savings that could be achieved, measured in terms of GDP for each year, would be 1.029% by 2050; 1.094% in 2057, the maximum; and 1.026% in the last year of projection. In terms of the present actuarial value and as a function of annual GDP, in 2050, the savings would be 1.27%, 1.40% in 2044, the maximum, and in 2067 it would decrease to 0.98%. |
| first_indexed | 2024-03-10T14:15:16Z |
| format | Article |
| id | doaj.art-18daed4ce8b6407ca5d8f4f5d4d538f8 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-10T14:15:16Z |
| publishDate | 2020-12-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-18daed4ce8b6407ca5d8f4f5d4d538f82023-11-20T23:47:04ZengMDPI AGRisks2227-90912020-12-018413410.3390/risks8040134The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain?Enrique Devesa0Mar Devesa1Inmaculada Dominguez-Fabián2Borja Encinas3Robert Meneu4Department of Financial and Actuarial Economics, Faculty of Economics, University de València (UV), 46010 Valencia, SpainDepartment of Financial and Actuarial Economics, Faculty of Economics, University de València (UV), 46010 Valencia, SpainDepartment of Financial Economics and Accounting, Faculty of Business, University of Extremadura, 10071 Cáceres, SpainDepartment of Financial Economics and Accounting, Faculty of Economics, University of Extremadura, 06006 Badajoz, SpainDepartment of Mathematics for Economics and Business, Faculty of Economics, University de València (UV), 46010 Valencia, SpainThe reform of 2013 represented a qualitative leap in the reform of the Spanish pension system. Unlike its predecessors, it introduced two automatic resetting mechanisms similar to those of other European countries. The first is the sustainability factor, scheduled to come into effect in 2019 but delayed until 2023, and its ultimate reversal cannot be ruled out. The objective of this study was to quantify the savings, or the lowest expenditure, that can be achieved in the Spanish public contributory pension system by applying it. These savings are measured in terms of cash—of annual expenditure—and in terms of accrual by calculating its present actuarial value. Combining these two methods is one of the contributions of this work. This work was only intended to analyze the impact of the Sustainability Factor, therefore, it did not take into account the impact of the Pension Revaluation Index, which is the second mechanism introduced in the reform of the pension to 2013. An ad hoc projection method was used, combining microdata from the Continuous Sample of Working Lives (MCVL), aggregate data from the pension system, the financial-actuarial projection method, and actuarial techniques. The diversity of the data used is the second contribution of this work. The application of the sustainability factor would improve the viability of the system, since the savings that could be achieved, measured in terms of GDP for each year, would be 1.029% by 2050; 1.094% in 2057, the maximum; and 1.026% in the last year of projection. In terms of the present actuarial value and as a function of annual GDP, in 2050, the savings would be 1.27%, 1.40% in 2044, the maximum, and in 2067 it would decrease to 0.98%.https://www.mdpi.com/2227-9091/8/4/134pay-as-you-go systemssustainabilityactuarial equityfinancial-actuarial methodpension savings |
| spellingShingle | Enrique Devesa Mar Devesa Inmaculada Dominguez-Fabián Borja Encinas Robert Meneu The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain? Risks pay-as-you-go systems sustainability actuarial equity financial-actuarial method pension savings |
| title | The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain? |
| title_full | The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain? |
| title_fullStr | The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain? |
| title_full_unstemmed | The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain? |
| title_short | The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain? |
| title_sort | sustainability factor how much do pension expenditures improve in spain |
| topic | pay-as-you-go systems sustainability actuarial equity financial-actuarial method pension savings |
| url | https://www.mdpi.com/2227-9091/8/4/134 |
| work_keys_str_mv | AT enriquedevesa thesustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT mardevesa thesustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT inmaculadadominguezfabian thesustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT borjaencinas thesustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT robertmeneu thesustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT enriquedevesa sustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT mardevesa sustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT inmaculadadominguezfabian sustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT borjaencinas sustainabilityfactorhowmuchdopensionexpendituresimproveinspain AT robertmeneu sustainabilityfactorhowmuchdopensionexpendituresimproveinspain |