Should pensions be redistributive? The impact of Spanish reforms on the system’s sustainability and adequacy

Concepció Patxot, Meritxell Solé and Guadalupe Souto

No 2017-02, Working Papers from FEDEA

Abstract: Concerns about the consequences of demographic ageing on the sustainability of the pension system has led to the adoption of reforms reducing pension expenditure. However, the impact of these reforms on pension adequacy is now coming under increasing scrutiny. Taking recent Spanish reforms as an example, this paper analyses the extent to which fostering pension sustainability threatens pension adequacy, with a particular focus on inter- and intragenerational equity. Using an extension of the DyPeS microsimulation model, results show that the introduction of mechanisms linking retirement pensions to the evolution of the social security budget balance has strong and negative effects on adequacy and on income redistribution. Unexpected effects of the Bismarckian reforms on income redistribution are also observed. The outcomes reported for the Spanish pension system highlight the need to reconsider the convenience of using the pension system as an income redistribution device.

Date: 2017-02
New Economics Papers: this item is included in nep-age, nep-eec and nep-pbe
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