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The fiscal and welfare consequences of the price indexation of Spanish pensions

Published online by Cambridge University Press:  27 December 2018

Julián Díaz-Saavedra*
Affiliation:
Universidad de Granada, Campus de la Cartuja s/n, Granada, Spain
*
Corresponding author. E-mail: julianalbertodiaz@ugr.es

Abstract

We study the fiscal and welfare consequences of three options for increasing pension generosity in Spain: (i) disability and minimum pensions are fully indexed with the Consumer Price Index (CPI); (ii) minimum and lower value pensions are fully indexed with the CPI; and (iii) returning to full price indexation of all Spanish pensions. While these reforms increase pension adequacy, the tax increases needed to finance the higher pension expenditure differ significantly. Moreover, most current cohorts prefer returning to the full price indexation of all Spanish pensions, but future cohorts prefer that only disability and minimum pensions be indexed with the CPI.

Type
Article
Copyright
Copyright © Cambridge University Press 2018

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