The financial impact of Spanish pension reform. A quick estimate
AbstractIn this paper we present a preliminary estimate of the financial impact of the recent reform of the Spanish pension system. After updating the projections of pension expenditure constructed in de la Fuente and Domenech (2010) for the period 2008-60, we analyze the impact on this variable of raising the retirement age from 65 to 67 years, extending from 15 to 25 years the period over which wages are averaged to calculate the starting pension and increasing from 35 to 37 the number of contribution years required to obtain a "full pension." Conditional on a series of assumptions about the evolution of employment, productivity and demographics, our estimates suggest that these measures will reduce pension expenditure by up to 1.4 percentage points of GDP once the reforms have been fully implemented in 2027, thereby stabilizing pension expenditure at a bit over 9% of GDP during the transition period and preventing the emergence of a structural deficit in the system before the end of the next decade. On the other hand, the existing uncertainty about the future evolution of the relevant variables suggests that it would be desirable to bring forward in time the introduction of the periodic evaluation of the system (the so-called sustainability factor) so as to have in place a mechanism that can be used to modulate the rhythm and scope of the reform if the system's financial situation requires it before the end of the transitional period.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1212.
Length: 22 pages
Date of creation: Jun 2012
Date of revision:
pension reform; Spain; retirement age;
Other versions of this item:
- De La Fuente, Angel & Doménech, Rafael, 2013. "The financial impact of Spanish pension reform: A quick estimate," Journal of Pension Economics and Finance, Cambridge University Press, vol. 12(01), pages 111-137, January.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-07-23 (Economics of Ageing)
- NEP-ALL-2012-07-23 (All new papers)
- NEP-EEC-2012-07-23 (European Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Angel de la Fuente & Jose E. Bosca, 2011.
"Gasto educativo por regiones y niveles en 2005,"
1119, BBVA Bank, Economic Research Department.
- Nathalie Aminian & K.C. Fung & Alicia Garcia-Herrero & Francis NG, 2012. "Trade in services. East Asian and Latin American Experiences," Working Papers 1204, BBVA Bank, Economic Research Department.
- J. Ignacio Conde-Ruiz & Clara I. González, 2013. "Reforma de pensiones 2011 en España," Hacienda Pública Española, IEF, vol. 204(1), pages 9-44, March.
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