IDEAS home Printed from https://ideas.repec.org/a/gam/jrisks/v8y2020i4p134-d458188.html
   My bibliography  Save this article

The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain?

Author

Listed:
  • Enrique Devesa

    (Department of Financial and Actuarial Economics, Faculty of Economics, University de València (UV), 46010 Valencia, Spain)

  • Mar Devesa

    (Department of Financial and Actuarial Economics, Faculty of Economics, University de València (UV), 46010 Valencia, Spain)

  • Inmaculada Dominguez-Fabián

    (Department of Financial Economics and Accounting, Faculty of Business, University of Extremadura, 10071 Cáceres, Spain)

  • Borja Encinas

    (Department of Financial Economics and Accounting, Faculty of Economics, University of Extremadura, 06006 Badajoz, Spain)

  • Robert Meneu

    (Department of Mathematics for Economics and Business, Faculty of Economics, University de València (UV), 46010 Valencia, Spain)

Abstract

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%.

Suggested Citation

  • Enrique Devesa & Mar Devesa & Inmaculada Dominguez-Fabián & Borja Encinas & Robert Meneu, 2020. "The Sustainability Factor: How Much Do Pension Expenditures Improve in Spain?," Risks, MDPI, vol. 8(4), pages 1-21, December.
    • Handle: RePEc:gam:jrisks:v:8:y:2020:i:4:p:134-:d:458188
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-9091/8/4/134/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-9091/8/4/134/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jose Enrique Devesa-Carpio & Mar Devesa-Carpio, 2010. "The cost and actuarial imbalance of pay-as-you-go systems: the case of Spain," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 13(3), pages 259-276.
    2. Díaz-Giménez, Javier & Díaz-Saavedra, Julián, 2017. "The future of Spanish pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(2), pages 233-265, April.
    3. Giuseppe Carone & Per Eckefeldt & Luigi Giamboni & Veli Laine & Stéphanie Pamies Sumner, 2016. "Pension Reforms in the EU since the Early 2000's: Achievements and Challenges Ahead," European Economy - Discussion Papers 042, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. José Enrique Devesa‐Carpio & Mar Devesa‐Carpio, 2010. "The cost and actuarial imbalance of pay‐as‐you‐go systems: the case of Spain," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(3), pages 259-276.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raffelhüschen, Bernd & Rudolph, Karen & Will, Sebastian, 2021. "Ehrbare Staaten? Update 2021: Die Nachhaltigkeit der öffentlichen Finanzen in Europa," Argumente zur Marktwirtschaft und Politik 160, Stiftung Marktwirtschaft / The Market Economy Foundation, Berlin.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hasan Altiok & Glenn Jenkins, 2013. "Social security generosity, budgetary deficits and reforms in North Cyprus," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 16(2), pages 218-235.
    2. Díaz-Saavedra, Julián, 2020. "The fiscal and welfare consequences of the price indexation of Spanish pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(2), pages 163-184, April.
    3. Wilke, Christina Benita & FOM Hochschule für Oekonomie & Management, KompetenzCentrum für angewandte (ed.), 2024. "Pension Reforms in the Nordic Countries and Germany: Conference Proceedings of the 2024 Annual Meeting of the German Society for Demography (DGD) by the Working Group on Demographic and Social Develop," KCV Schriftenreihe, FOM Hochschule für Oekonomie & Management, KCV KompetenzCentrum für angewandte Volkswirtschaftslehre, volume 8, number 307058.
    4. Pérez, Carlos & Martín-Román, Ángel & Moral, Alfonso, 2020. "Two decades of the complementary leisure effect in Spain," The Journal of the Economics of Ageing, Elsevier, vol. 15(C).
    5. Mazzotta, Fernanda & Bettio, Francesca & Zigante, Valentina, 2018. "And Thou Shalt Honor: children’s caregiving, work and religion," GLO Discussion Paper Series 202, Global Labor Organization (GLO).
    6. Evsey T. Gurvich, 2019. "Long-Term Global Trends in Pension Policy," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 9-26, December.
    7. Esteban García-Miralles & Nezih Guner & Roberto Ramos, 2019. "The Spanish personal income tax: facts and parametric estimates," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 439-477, November.
    8. Sheila Rose Darmaraj & Suresh Narayanan, 2019. "The Long-Term Financial Sustainability of the Civil Service Pension Scheme in Malaysia," Asian Economic Papers, MIT Press, vol. 18(1), pages 155-178, Winter/Sp.
    9. Giuseppe Croce & Andrea Ricci & Giuliana Tesauro, 2019. "Pensions reforms, workforce ageing and firm-provided welfare," Applied Economics, Taylor & Francis Journals, vol. 51(32), pages 3480-3497, July.
    10. Pilar García-Gómez & Sílvia Garcia-Mandicó & Sergi Jiménez-Martín & Judit Vall-Castelló, 2018. "Trends in Employment and Social Security Incentives in the Spanish Pension System, 1980–2016," NBER Chapters, in: Social Security Programs and Retirement around the World: Reforms and Retirement Incentives, pages 317-371, National Bureau of Economic Research, Inc.
    11. J. Ignacio Conde-Ruiz & Clara I. González, 2016. "From Bismarck to Beveridge: the other pension reform in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 461-490, November.
    12. Lanotte, Myriam & Devolder, Pierre, 2022. "Communication relative aux pensions : digitalisation et défis pour l'avenir," LIDAM Discussion Papers ISBA 2022015, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    13. repec:ers:journl:v:xxiv:y:2021:i:3b:p:421-433 is not listed on IDEAS
    14. Harpa S. Eyjólfsdóttir & Neda Agahi & Johan Fritzell & Carin Lennartsson, 2022. "Physical functioning as a predictor of retirement: Has its importance changed over a thirty-year period in Sweden?," European Journal of Ageing, Springer, vol. 19(4), pages 1417-1428, December.
    15. Nerlich, Carolin, 2020. "How costly are pension reform reversals?," Research Bulletin, European Central Bank, vol. 68.
    16. Mattia Guidi & Igor Guardiancich, 2018. "Intergovernmental or supranational integration? A quantitative analysis of pension recommendations in the European Semester," European Union Politics, , vol. 19(4), pages 684-706, December.
    17. Gordana Matković & Katarina Stanić, 2020. "The Serbian Pension System In Transition: A Silent Break With Bismarck," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(225), pages 105-134, April – J.
    18. Malgorzata Gumola-Kardas, 2021. "Change in a Pension System: A Manageable and Measurable Process?," European Research Studies Journal, European Research Studies Journal, vol. 0(3 - Part ), pages 421-433.
    19. Javier Diaz Gimenez & Javier Diaz Jimenez, 2017. "Catalonia; Independence and Pensions," ThE Papers 17/04, Department of Economic Theory and Economic History of the University of Granada..
    20. María del Carmen Ramos-Herrera & Simón Sosvilla-Rivero, 2020. "Fiscal Sustainability in Aging Societies: Evidence from Euro Area Countries," Sustainability, MDPI, vol. 12(24), pages 1-20, December.
    21. Nerlich, Carolin, 2020. "How costly are pension reform reversals?," Research Bulletin, European Central Bank.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jrisks:v:8:y:2020:i:4:p:134-:d:458188. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.