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Workshop on the implementation of the 2008 SNA. Implementation of the new pension satellite account in Spain by Alfredo Cristobal [email protected] Director of National Accounts and Employment OECD. Paris, 24-27 October 2011. Contents. Motivation

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Workshop on the implementation of the 2008 SNA

Implementation of the new pension satellite account in Spain

by Alfredo Cristobal

[email protected]

Director of National Accounts and Employment

OECD. Paris, 24-27 October 2011


Contents
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


Contents1
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


Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011


Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011


Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011



Accrued to date liabilities
Accrued-to-date liabilities October 2011

  • 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


Accrued to date liabilities1
Accrued-to-date liabilities October 2011

  • Substantial amount (two-times GDP or even more)

  • Capacity of government to meet this cost. Government decides …

    • 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


Milestones
Milestones October 2011

  • 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


Contents2
Contents October 2011

  • 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


Spain two pension schemes managed by general government
Spain: two pension schemes managed by General Government October 2011

  • 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


Clases pasivas
Clases Pasivas October 2011

  • 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


Social security scheme
Social Security scheme October 2011

  • 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


Similarities
Similarities October 2011

  • 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

Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011


Contents3
Contents October 2011

  • 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


Domestic working group
Domestic Working Group October 2011

  • 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


2 similar models
2 similar models October 2011

  • Social Security

  • Government employer pension scheme

Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011


Model for social security
Model for Social Security October 2011

  • Just contributory pensions

    • 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


Case 1 already existing pensions
Case 1: Already existing pensions October 2011

  • 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


Case 2 future pensions of active population
Case 2: Future pensions of active population October 2011

  • 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


Continuous sample of working lives
Continuous sample of working lives October 2011

  • 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


Continuous sample of working lives1
Continuous sample of working lives October 2011

  • 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


  • Sample of working lives. For each individual October 2011

    • 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


Assumptions related to the benefits
Assumptions related to the benefits October 2011

  • 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


Assumptions related to the valuation
Assumptions related to the valuation October 2011

  • 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




Thank you for your attention ! October 2011

Workshop on the implementation of the 2008 SNA. OECD. Paris, October 2011


Workshop on the implementation of the 2008 SNA October 2011

Implementation of the new pension satellite account in Spain

by Alfredo Cristobal

[email protected]

Director of National Accounts and Employment (INE)

OECD. Paris, 24-27 October 2011


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