Abstract

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The Actuarial Balance Sheet for Pay-as-You-Go Finance: Solvency Indicators for Spain and Sweden


María el Carmen Boado-Penas


University of Liverpool

Salvador Valdes-Prieto


Pontifical Catholic University of Chile - Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Carlos Vidal-Meliá


University of Valencia - Faculty of Economics

January 2008

CESifo Working Paper Series No. 2182

Abstract:     
This paper provides the first estimate of the actuarial balance of the Spanish contributory pension system for the old age contingency, based on official data. The novel entry in the balance sheet, named "Contribution Asset" or "Hidden Asset", is at the centre of the theoretical discussion. A comparison between the official balance sheet for the Swedish national account system and our balance sheet for the Spanish system is also provided. The main finding is that the Spanish pension system has an insolvency rate of 31.4 %. The policy implication is that unless current legislation is reformed, Spanish taxpayers (the plan sponsor) should count on making transfers to the pension system with a present discounted value of 31.4 % of current liabilities. Moreover, a comparison of the consecutive balance sheets for 2001-06 shows that the degree of insolvency is growing over time, even though the cash-flow outcome has improved over the same period. Taking steps to reverse this trend and restore solvency is in the Spanish taxpayers' interest, and possibly also in the interest of those in the European Union who recognise that there is a chance that they may have to support the Spanish budget in the future.

Number of Pages in PDF File: 34

Keywords: retirement, pay-as-you-go system, accountancy, solvency, pensions, Spain

JEL Classification: H55, J26, M49

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Date posted: January 14, 2008  

Suggested Citation

Boado-Penas, María el Carmen and Valdes-Prieto, Salvador and Vidal-Meliá, Carlos, The Actuarial Balance Sheet for Pay-as-You-Go Finance: Solvency Indicators for Spain and Sweden (January 2008). CESifo Working Paper Series No. 2182. Available at SSRN: http://ssrn.com/abstract=1083647

Contact Information

María del Carmen Boado-Penas
University of Liverpool ( email )
Liverpool
United Kingdom
Salvador Valdes-Prieto
Pontifical Catholic University of Chile - Institute of Economics ( email )
Casilla 76
Correo 17
Santiago
Chile
562-686-4326 (Phone)
562-552-1310 (Fax)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Carlos Vidal-Meliá (Contact Author)
University of Valencia - Faculty of Economics ( email )
Valencia, E-46022
Spain
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