Workshop on the implementation
of the 2008 SNA
Implementation of the new pension satellite
account in Spain
by Alfredo Cristobal
alfredo.cristobal@ine.es
Director of National Accounts and Employment
OECD. Paris, 24-27 October 2011
Implementation of the new pension satellite account in Spain
Contents
 Motivation
 Pension Schemes sponsored by General Government in Spain
 Model for estimating household future pension entitlements
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Contents
 Motivation
 Pension Schemes sponsored by General Government in Spain
 Model for estimating household future pension entitlements
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Life expectancy at birth in Spain
90
90
female
88
88
86
86
84
84
male
82
82
80
80
78
78
76
76
2009
2014
2019
2024
2029
2034
2039
2044
Source: INE Spain. Long -term projections of the population: 2009-2048
 Increase of the population longevity (+ or – 6 years till 2048)
 Moderate birth rates
 Gradual ageing in the demographic structure
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Life expectancy at 65 years old in Spain
92
91
90
89
88
87
86
85
84
83
82
92
91
90
89
88
87
86
85
84
83
82
female
male
2009
2014
2019
2024
2029
2034
2039
2044
Source: INE Spain. Long-term projections of the population: 2009-2048
 Same case for people over 65
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Population projected over 65 years old in Spain
10
million of persons
9
8
7
6
male
female
5
4
3
2
1
0
2009
2048
Source: INE Spain. Long-term projections of the population: 2009-2048
 Population aged over 65:
Is set to double in 40 years
32% of the total population
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Population projected in Spain by age in 2009
Population projected in Spain by age in 2048
100+
100+
95-99
95-99
90-94
female
male
female
male
90-94
85-89
85-89
80-84
80-84
75-79
75-79
70-74
70-74
65-69
65-69
60-64
60-64
55-59
55-59
50-54
50-54
45-49
45-49
40-44
40-44
35-39
35-39
30-34
30-34
25-29
25-29
20-24
20-24
15-19
15-19
10-14
10-14
5-9
5-9
0-4
0-4
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Accrued-to-date liabilities
 To estimate the impact of these liabilities in Pay-As-You-Go
(unfunded) schemes
 In principle, should not be included in core accounts
(implicit, no real liability)  supplementary table
Table 29 of the ESA2010 Transmission Program
 Narrow measure. By themselves, they are not an indicator of
sustainability of public finance
 To add flows
 Assets?
 To estimate the expected expenditure of government (AWG)
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Accrued-to-date liabilities
 Substantial amount (two-times GDP or even more)
 Capacity of government to meet this cost. Government decides …
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Retirement age
Period to be considered for pension calculations
Formula to calculate pensions
Others …
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Milestones
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CMFB Task Force (Spain attended: NSI and Central Bank)
Working group at domestic level chaired by NSI
National model
Supplementary table
Data for 2005 (flows and stocks)
Check with data provided by Freiburg University
Contact group
New estimates for 2006 to 2009
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Contents
 Motivation
 Pension Schemes sponsored by General Government in Spain
 Model for estimating household future pension entitlements
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Spain: two pension schemes managed by
General Government
 Government Employer social security scheme for officials
belonging to the so called Administracion General del Estado
(Clases Pasivas)
 Social security scheme for the rest of workers
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Clases Pasivas
 Officials from …
 Central Government
 Army, Justice, Law Courts
 Public universities related to the State
 Those officials initially belonging to Central Government and
currently working in the State Government (Regional) after
transferring powers
 Ex-presidents, vice-presidents and ministers
 +- 0,9 million active individuals and +- 0,5 million pensioners
(2009)
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Social Security scheme
 Rest of workers
 Pay-As-You-Go system
 +- 20,6 million active (employed or unemployed) individuals and
+- 8,6 million pensioners (2009)
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Similarities
People obliged by law to participate. No personal election
Risk exposure
Legal framework
Funding (both unfunded)
Ability of Government to change the conditions or the benefit
formula
 No duplicity: if pension entitlements for both schemes have been
accumulated, only one must be chosen
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Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Contents
 Motivation
 Pension Schemes sponsored by General Government in Spain
 Model for estimating household future pension entitlements
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Domestic Working Group
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Ministry of Labour and Social Affairs
Social Security Treasury
Ministry of Finance
Audit Office of the General Government
Central Bank
National Statistical Institute (leader)
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
2 similar models
 Social Security
 Government employer pension scheme
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Model for Social Security
 Just contributory pensions
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Retirement pensions
Retirement by disability
Disability allowance
Widowhood
Orphanage
 Social contributions are not fully related with pensions
 Individuals
 Active population (currently paying social contributions not having generated a
pension yet)
 Current pensioners
 Total of pension entitlements =
 + Pensions of existing pensioners (case 1)
 + Future pensions of current active population (case 2)
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Case 1: Already existing pensions
 Number of pensions * average amount of contributory pension
 Type of pension, sex, age of birth
 Actuarial techniques
 Assumptions on
 Revaluations
 Life expectancy
 Discount rate
 Present value of the pension entitlements
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Case 2: Future pensions of active population
 Continuous sample of working lives (+/- 800.000 individuals)
Stochastic model + assumptions
 Pension generated by each individual in the sample (type, date,
amount)
Grossing up
 Pensions generated by whole active population
 Discount rate: present value of pension entitlements
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Continuous sample of working lives
 Sample: representative of all individuals with relations with Social
Security in one year
 Continuous: is yearly updated
 Working lives: with historic data kept in Social Security records
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Continuous sample of working lives
 Target population (universe): more than 29 million individuals
 Sample size: almost 1,2 million (4%, grossing up factor: 25)
 Of these, 835 th active individuals (last year)
 Distribution (random draw)
 607 th will receive a retirement pension with different ages from 50 to 99
 154 th will receive a disability pension with different ages from 18 to 66
 63 th will receive a widowhood pension by decease of the partner included
both in the sample with different ages from 15 to 73
 11 th will not receive any benefit by decease without partner
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
 Sample of working lives. For each individual
 Number of days paying social contributions to Social Security
 Average contributions base (salaries)
 Simulation process (stochastic model and assumptions)
 Future salaries
 Frequency of death, invalidity and retirement estimated by age and sex
 Unit Credit Method:
 Time individual paying contributions / total expected working life
 Future pension
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Assumptions related to the benefits
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No retirement under the age of 50
Retirement by disability: All people at 65
Disability: No cases under 16
Widowhood: No cases under 16
Orphanage: All cases from 0 to 21
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Assumptions related to the valuation
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Demographic tables (men, women) till 100 years (NSI)
Social security records  invalidity pensioners
Salary increase: +1,8% real terms
Pseudo PBO
Discount rate: 3% real terms (same used in AWG works)
Inflation rate: 2%
Age difference between married couples: 3 years
Marriage rate of pensioners: 92%
Instalments: 12 payments
Reversion in case of widowhood: 60% pension
Orphan income  until age of 22
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Implementation of the new pension satellite account in Spain
Not in the standard accounts
Social security
pension schemes
H
Classified in general
government
G
Year 2009 (data in billion euro)
Opening balance sheet
1 Pension entitlements
Changes in pension entitlements due to transactions
2 Increase in pension entitlements due to social contributions
2,1 Employer actual social contributions
2,2 Employer imputed social contributions
2,3 Household actual social contributions
2,4 Household social contribution supplements
5)
237,6
2.723,3
21,9
0,0
229,4
69,9
8,8
1,1
23,3
12,0
136,2
26,8
3 Other (actuarial) change of pension entitlements in social security pension schemes
4 Reduction in pension entitlements due to payment of pension benefits
9,6
90,0
12,3
166,2
5 Changes in pension entitlements due to social contributions and pension benefits
6 Transfers of pension entitlements between schemes
7 Change in entitlements due to negotiated changes in scheme structure
Changes in pension entitlements due to other flows
8 Changes in entitlements due to revaluations
6)
9 Changes in entitlements due to other changes in volume
6)
71,5
Closing balance sheet
10 Pension entitlements
Gross Domestic Product
10 Pension entitlements (% / GDP)
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
249,9
2.961,0
1.047,8
1.047,8
23,9
282,6
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Implementation of the new pension satellite account in Spain
Accrued-to-date liabilities
350
300
% / GDP
250
200
150
100
50
0
2005
2006
Social Security
2007
2008
Clases pasivas
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
2009
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Implementation of the new pension satellite account in Spain
Thank you for your attention !
Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011
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Workshop on the implementation
of the 2008 SNA
Implementation of the new pension satellite
account in Spain
by Alfredo Cristobal
alfredo.cristobal@ine.es
Director of National Accounts and Employment (INE)
OECD. Paris, 24-27 October 2011