Abstract
The aim of this chapter is to review the main instruments and indicators used to measure the sustainability of PAYG pension systems. It will distinguish between defined contribution and defined benefit systems, due to the various implications that each of them has. It will also be necessary to review the different types of sustainability instruments, for example, those based on cash criteria, financial criteria set by the economic cycle and actuarial criteria. For the actuarial criteria, we will review the criteria of the internal rate of return (IRR) and the actuarial balance. Subsequently, we will review which countries publish official pension system sustainability data and what kind of indicators they choose. We will also use the databases of international organizations to analyse what level of pension system sustainability information is being provided. Finally, we will reflect on the advantages and disadvantages of each of the indicators and set a series of recommendations for the different countries in order to improve the information given on the sustainability of their pension systems.
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Notes
- 1.
We are facing what is known in the literature as a system of notional accounts. In this regard you can refer to Devesa and Vidal 2004.
- 2.
In Spain a manifest was published in 2013, (Manifiesto 2013) signed by jurists and economists known as “In defense of the public pension system”, where such a statement was made.
- 3.
There are several typologies for classification, but we have chosen to present the one that seems best from a financial-actuarial point of view.
- 4.
For example, in many countries there are microdata of samples, enabling to carry out the calculations. In Spain, for example, they are made from the so-called Continuous Work History Sample, provided to researchers by the social security itself.
- 5.
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Devesa-Carpio, J.E., Rosado-Cebrian, B., Álvarez-García, J. (2020). Sustainability of Public Pension Systems. 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_6
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