Delayed-Retirement Incentives in Spain: Evaluating Lump-Sum Commutation and Actuarial Fairness

Ahmed Ación López and Carlos Vidal-Meliá

No eee2026-25, Studies on the Spanish Economy from FEDEA

Abstract: Spain’s delayed-retirement rules allow eligible workers to choose between a permanent pension supplement, a statutory lump sum, or a mixed option. This paper evaluates whether exchanging the life-contingent supplement for the lump sum is actuarially neutral and examines how behavioral and institutional channels affect the financial comparison. The analysis combines income-stratified mortality, a simulation grid of 280 institutionaldemographic profiles, and population weights derived from the 2024 Continuous Sample of Working Lives (MCVL). Under dynamic segmented mortality, the baseline MCVLweighted ratio of the lump sum to the actuarial present value of the foregone supplement is 0.512, and none of the simulated profiles reaches actuarial neutrality. The shortfall is larger for women and higher-pension profiles because the lump-sum formula is concave in pension entitlement and does not incorporate longevity differences. Tax treatment, policy risk, and present-oriented discounting can make commutation financially defensible for some profiles. In the most favorable combined scenario, profiles reaching financial indifference represent 39.38% of the MCVL-weighted population and contain 8.0 percentage points of the observed 24.02% lump-or-mixed take-up rate. Under the central CRRA specification, the MCVL-weighted certainty-equivalent gap is 3.0%, although this welfare result is conditional on the maintained assumptions. The findings support clearer actuarial information and a review of the statutory formula, while distinguishing formula non-neutrality from the rationality of individual choices.

Date: 2026-08
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