The Forum of Experts of the Aviva Savings and Pensions Institute is leading the new Government of the People’s Party to take control of the ambitious reform of pensions approved on 21 July this year through the “Law on the updating, adjustment and modernisation of the social security system”.
- They're proposing more thorough parametric reforms as a transition towards a pensions system of distribution and contribution defined with notional accounts.
- They qualify the reform of last July as positive but insufficient, as it does not remedy the expected increase in the charge of nine points on the GDP in the public accounts, and therefore does not guarantee the system’s future viability.
- The Institute is launching its website (www.institutoavivadeahorroypensiones.es) where it places a pensions calculation tool at the public’s disposal, drawn up together with International FA’s (Financial Analysts).
The Forum of Experts of the Aviva Savings and Pensions Institute is leading the new Government of the People’s Party to take control of the ambitious reform of pensions approved on 21 July this year through the “Law on the updating, adjustment and modernisation of the social security system”. This is what can be deduced from the conclusions of its report entitled “The Reform of State Pensions”, the result of the first meeting held by the Forum last October, which analysed the causes that gave rise to the reform and the implemented measures.
As stated in the document, the burden of pensions on the GDP would increase from 9% at present to approximately 18% in 2050. It is estimated that the current reform only covers 3% points of this increase, but does not provide a solution to the financing of the other two thirds. It has also generated an excessively complex legal framework, full of exceptions which are difficult to understand by the man in the street.
Guillermo de la Dehesa, chairman of the Forum of Experts, has affirmed that “the reform of the system is a matter of vital importance in order to ensure the well-being of future generations, and this phase presents a further opportunity to make this objective, which began to take shape with the previous law, become a reality”. He also added that “this is not a matter of replacing the system of distribution, but of modifying it, and in order to do make it viable we must aim at a system of minimum pensions”.
New parametric reforms to be put into effect:
- To bring forward the implementation of the sustainability factor in order to provide instruments that make it possible to take new measures should the situation so require.
- The demographic sustainability factor must be designed by taking into account factors such as the rate of dependency, or other variables which have a direct effect on the financial soundness of the system, as happens in other countries.
- Longer grace period. To draw 50% of the pension with only 15 years of contribution is excessively generous and makes it difficult to ensure the financial viability of the system.
- The retirement pension must be proportional, in actuarial terms, to the contributions effectively made throughout one's entire working life.
- The retirement age must be postponed, but flexibly, and the pension must depend on the life expectancy upon retirement. It should be possible for the retirement age to be free, provided the individual is aware of the fact that, once retired, he would only draw his pension in accordance with what he contributed.
Website of the Aviva Savings and Pensions Institute and pension calculation tools
Another of the recommendations that the Forum of Experts mentions in its report is that of the transparency of information of the administration with respect to the benefits that people are to receive once they retire. Although the law approved last July confirms the right of citizens to receive these amounts as from 2013, the implementation of the measure is not being developed. The Aviva Savings and Pensions Institute advocates a consolidated annual pensions report of universal scope for all contributors, which allows the man in the street to have an estimation of the quantity of his future benefits.
In this sense, the Institute has drawn up a tool, together with International Financial Analysts, which will allow citizens to calculate the quantity of their benefit once they retire, so that they can be aware of their responsibility as regards planned savings. The retirement calculator, together with another that makes it possible to calculate the degree of protection, is available on the new website of the Aviva Savings and Pensions Institute: www.institutoavivadeahorroypensiones.es/corporativa/herramientas.
This new website also contains a multitude of related documents within the framework of welfare, studies carried out by the Institute and all the information deriving from the Forum of Experts (reports, meetings, CV’s of members etc). The section entitled "Forum of Experts/Reports" contains the report entitled “Reform of State pensions”.
Members of the Forum of Experts who drew up the report:
- Guillermo de la Dehesa (chairman), chairman of the board of directors of Aviva España
- Ignacio Conde Ruiz, professor at the Universidad Complutense of Madrid and senior investigator of FEDEA
- Juan José Dolado, professor of the Department of Economics of the Carlos III University of Madrid
- Rafael Domenech, chief economist for Spain and Europe of the BBVA Research Department
- José Antonio Herce, director shareholder of AFI
- Cesar Molinas, Doctor in Economics and Mathematics.
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Further information please contact:
Beatriz Egido
Telephone: +34 91 418 4852
Email: beatriz.egido@edelman.com
Laura Villuendas
Telephone: +34 91 297 18 17 / +34 696 576 921
Email: laura.villuendas@aviva.es
Notes to editors
The Aviva Savings and Pension Institute is a research and debate platform created by Aviva, the leading European life and pensions insurance group. Its main objective is to promote debate on the problem of sustainable savings, and to indicate two key areas of action: to assist people in understanding their financial decisions and to promote collective collaboration to change consumer attitudes towards long-term savings.
The basic pillar of the Institute consists of a Forum of Experts comprising seven professionals and researchers from the world of economics and pensions, under the chairmanship of Guillermo de la Dehesa. The activity of the Institute is set within three areas of action: the work of research and reflection of the Forum of Experts, the generation of periodical studies on the subject of pensions and long-term savings, and the development of tools for analysis, assistance and consultancy for use by citizens. www.institutoavivadeahorroypensiones.es