Disability Pensions in Spain: A Factor to Compensate Lifetime Losses

Among the different instruments used by the welfare state to protect vulnerable population, there are the disability pensions. These pensions appear as key elements to protect disable people in the absence or breaks in their labour careers. The Spanish pay-as-you-go social security system is a good example of disability pension provision. In Spain, a safety-net combines means-tested and non-means-tested elements to guarantee a certain level of income to individuals with a given degree of disability. In this chapter attention is focused on the second type of component; that is to say, the pensions entitled to the people who having contributing for a certain period of time, have later in life, caused a disability pension. The pension entitled in this later case is computed according to the labour profile of the individual and, consequently, linked to her or his past contributions to the social security system. However, the method used to compute the main component of the pension leaves the beneficiaries of a disability pension in a disadvantageous situation compared to the beneficiaries of a regular pension. This paper discusses this loss and defines a factor to compensate that loss.