Abstract
Recent reforms of public pension systems implemented in various countries, including Spain, have sought to ensure the sustainability of benefits. However, achieving a structural budget balance (i.e. long-run equality between income and expenditure) may result in a decrease in the replacement rate or in the percentage that the pension represents of the last salary. The development of complementary pension schemes, both occupational and personal, is presented as a feasible alternative for increasing the adequacy of benefits. However, both systems face significant challenges in their further implementation, with business structures, on occasions, being highly concentrated in small and medium enterprises and under the significant influence of longevity, inflation and interest rate risks. This chapter presents a comprehensive analysis of the possibilities offered by the second and the third pillars to complement public pension systems and their possible innovations for increasing their level of penetration in different countries.
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Notes
- 1.
A broad definition of these systems can be found in Barr (2006).
- 2.
Details can be consulted at http://www.nestpensionguide.co.uk.
- 3.
For a detailed historical analysis of these systems, see Valero (2013).
- 4.
This corresponds to the Taoist doctrine of wu wei, literally non-doing or passive achievement. Various editions of Tao Te Ching, ascribed to Lao Tzu, can be consulted; for instance Tzu (2016).
- 5.
See Benartzi et al. (2011) and their explanation of ‘framing’ in the case of annuitisation, in which they present the rents as ‘consumption frames’ and not as ‘investment frames’.
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Acknowledgements
The study was supported by ICREA Academia, the Spanish Ministry of Economy and Competitiveness and the ERDF under grants ECO2015-66314-R and ECO2016-76203-C2-2-P.
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Ayuso, M., Guillen, M., Valero, D. (2020). The Role of Complementary Pensions. In: Peris-Ortiz, M., Álvarez-García, J., Domínguez-Fabián, I., Devolder, P. (eds) Economic Challenges of Pension Systems. Springer, Cham. https://doi.org/10.1007/978-3-030-37912-4_16
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