Spanish actuaries join the critical wing and argue that the revaluation with the CPI threatens the sustainability of the system in the coming decades
As of today, the pension reform designed by the Minister of Social Security, José Luis Escrivá, has a new opponent: the Institute of Spanish Actuaries, which joins the critical camp in which the Bank of Spain, the Bank Central European Union (ECB) , the European Commission, the AIReF, the CEOE…
«Escrivá reform deprives future pensions and does not guarantee the fairness of the Spanish model». It is the hard diagnosis made in a report published this Wednesday by the College of Actuaries, the group dedicated to projecting and managing economic risks and analyzing their financial impact, always from a scientific point of view and on based on the most likely evolution that can be awaited in the system.
For this organization, the recently approved first phase of pensions, which again revalues pensions with the real CPI and replaces the sustainability factor with a new intergenerational equality mechanism, reinforces the pension adequacy, which it believes is “positive”, but is however deteriorating in strengthening the sustainability (current and future capacity of the system to fulfill its obligations) and fairness (actuarial equivalence between what is delivered and what is received) of the system, two important aspects that, in the medium-long term (20-30 years), they jeopardize pension adequacy, i.e. the system’s ability to provide retirees with a standard of living comparable to those they had when they were active, and to protect them against situations of poverty.
This is due to the fact that the first package of government measures will lead to an increase in pension expenditure, mainly due to the revaluation of pensions with the CPI, but also due to the repeal of the Sustainability Factor , while the changes in deferred and early retirement – Escrivá’s big hopes to increase collection – will yield an “uncertain outcome”, but at best will mean “only a small drop in spending”.
The report analyzes the impact of the reform on the Spanish pension system through the four main elements that can be studied from this financial actuarial point of view: the revaluation of pensions, delayed retirement, early retirement and the Mechanism of Intergenerational Equity (MEI). ) ).
The actuaries believe that the revaluation with the CPI “eroses” and “threatens” the sustainability of the system. They point out that preserving the purchasing power of pensions is an objective that must be in the minds of all representatives of the bourgeoisie, but at the same time make it clear that for this purpose a “correct” quantification of what this measure may entail and who will bear these costs to wear.
For this reason, Enrique Devesa, Professor of Financial and Actuarial Economics, warns that “the major effort involved in revaluing pensions with the CPI should be known to all, because the implications of this rule do not only affect the current generation of contributors. , but will extend over several decades.
Along this line, the report argues that the new intergenerational equality mechanism, which assumes a six-tenths increase in social contributions over the next few years to be used to fill the ‘piggy bank’ of pensions, “does not improve the pension”. “The abolition of the sustainability factor must be supplemented by a mechanism that generates the same level of savings”, which has not been the case -explain the experts-, as the MEI will give rise to a that currently accrued deficit of 7.75 points of GDP for that year.
In addition, they criticize the new scheme that “punishes” postponed retirements as rewards for postponed retirement should be “generous”, about 5.4% per year, compared to the 4% set by the reform. Likewise, they believe that the early retirement model follows an “unreasonable criterion” and these experts suggest setting a single coefficient of 0.45% for each month of anticipation.
For all these reasons, actuaries are arguing that the 2021 reform “could be completed, nuanced or even amended if, as the calculations indicate it could happen, it turns out that it is not aligned with the objective of striking an adequate balance.” finding between the current and future beneficiaries of the system”.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
