SPAIN COUNTRY FICHE. AGEING WORKING GROUP October 2014 projection exercise ( ) IMPACT OF AGEING POPULATIONS ON PENSIONS

Transcription

1 SPAIN COUNTRY FICHE AGEING WORKING GROUP Ocober 2014 projecion exercise ( ) IMPACT OF AGEING POPULATIONS ON PENSIONS

2 SPAIN COUNTRY FICHE (21 APRIL 2015) AWG Ocober 2014 projecion exercise ( ) IMPACT OF AGEING POPULATIONS ON PENSIONS CONTENTS EXECUTIVE SUMMARY... 3 I. OVERVIEW OF THE PENSION SYSTEM... 4 I.1. Descripion... 4 I.2. Main pensions formulas... 4 I reforms... 6 I.4. "Consan policy" assumpions on pension revaluaion... 8 II. DEMOGRAPHIC AND LABOUR FORCES PROJECTIONS... 9 II.1. Demographic developmens... 9 II.2. Labour force projecions... 9 III. PENSION PROJECTION RESULTS III.1. Exen of he coverage III.2. Overview of projecion resuls III.3. Main driving forces behind he projecion resuls III.4. Financing of he pension sysem III.5. Sensiiviy analysis III.6. Changes in comparison wih previous projecions IV. PROJECTION METHODOLOGY AND ASSUMPTIONS IV.1. Daa used o run he models IV.2. General descripion of he models IV.3. Projecing public earnings-relaed pensions: Model 1 mehodology IV.4. Projecing public earnings-relaed pensions: Model 2 mehodology IV.5. Projecing non-earnings-relaed pensions: Model 3 mehodology IV.6. Projecing privae pensions: Model 4 mehodology IV.7. Susainabiliy facor for reiremen pensions IV.8. New index for pension revaluaion (IPR) V. ANNEX V.1. Insiuional conex V.2. Alernaive pension spending decomposiion V.3. Maximum and minimum pensions and conribuory bases

3 EXECUTIVE SUMMARY Back o index This counry fiche was presened o he Ageing Working Group (AWG) on 28 h Ocober 2014 and has been endorsed by he Economic Policy Commiee. Is resuls shall be included in he Ageing Repor 2015 (AR2015). From he Ageing Repor 2012 (AR2012) major revisions on he raio of projeced pension expendiure o GDP have been observed. The AR2015 expecs expendiure o be fla, going from 12.1 o 11.2 p.p. of GDP, whereas he AR2012 expeced an increase from 10.4 o 13.7 p.p. In oher word he change in his raio beween 2013 and 2060 has dramaically dropped, from a projeced increase of 3.3 p.p. o a projeced decrease of 0.9 p.p., which represens a moderaion in he growh rae of pension expendiure of 4.3 p.p. The reasons behind his change are relaed boh o he change in underlying assumpions and o he 2013 reforms. Regarding he change in macroeconomic and demographic assumpion i is remarkable he significan upwards correcion of he expendiure o GDP raio for he base year 2013, from 10.4 o 12.1 p.p., which reflecs a noiceable downwards revision of he 2013 GDP. The oher grea macroeconomic adjusmen sems from he updae in he populaion projecion of Eurosa, EUROPOP2013. Eurosa now projecs he overall populaion of Spain o be sable hroughou he projecion period a around 46 million peopl compared o an increase of approximaely 6 million in he previous projecions. This correcion is mainly explained by he negaive levels of ne migraion expeced in he firs decade of he projecion, which reverberaes hrough he enire projecion horizon, yielding a lower labour force and a lower GDP level in he AR2015. The old age dependency in he AR2015 is higher han in he AR2012 beween 2013 and 2050, going from 27% o 63% in However, in he las decade he projeced annual inflows of migrans progressively recover o AR2012 level and consequenly he dependency raio in he AR2015 iniiaes a downwards pah, so ha by he end of he projecion he old age dependency raio is 53%, below ha in he AR2012 (56%). In sum, his evoluion of he dependency raio pus upwards pressure in expendiure during he period , bu downward pressure hereafer. I is also imporan o noe ha unemploymen suffers a shaper reducion in he AR2015 han in AR2012 becaus alhough in 2060 he unemploymen rae (15-74) level is approximaely he same (7%), he saring poin in he AR2015 (26%) is much higher han in he AR2012 (20%). All facors aken ino accoun, he change in assumpions increases he expendiure o GDP raio by 0.1 p.p. in Wih respec o he 2013 reform hey comprise hree main measures: sricer condiions for earlier reiremen, a susainabiliy facor and a new index for pension revaluaion (IPR). The hree combined generae savings amouning o 2.6 p.p. by By limiing eligibiliy condiions and esablishing siffer penalies for early reiremen, he expendiure o GDP raio migh decrease by 0.2 p.p. in The susainabiliy facor, which auomaically adjuss he benefi of new Social Securiy reiremen pensions o developmens in life expecancy from 2019 onward provides addiional savings of 1 p.p. by Finally, he IPR, which links he revaluaion of every kind of pension o aaining a srucural financial balance of he Social Securiy sysem, moderaes spending by a furher 1.7 p.p. by The European Sysem of Naional Accouns (ESA) 2010 was inroduced from Sepember As decided by he AWG, Member Saes do no need o be updae heir pension counry fiches o reflec he new naional accouns. The Commission services will incorporae he ESA2010 revision by updaing he GDP series for he base year (2013), and by applying he previous growh raes of boh GDP and he pension projecions from 2013 onwards hroughou he projecion horizon. 3

4 I. OVERVIEW OF THE PENSION SYSTEM I.1. Descripion Back o index a) The public sysem is based on wo schemes: an earnings-relaed social securiy scheme and a non-earnings relaed basic scheme. In his projecion exercise he earnings-relaed pensions (including complemens o reach he minimum pension) and he old-age nonearnings relaed pensions have been considered. - The earnings-relaed social securiy scheme is a mandaory pays-as-you-go public sysem and consiss of wo pars. The Social Securiy manages he main par, whose expendiure amouned o 10.8% of GDP in I covers he self-employed, he employees in he privae secor and par of he employees a he cenral, regional and local public adminisraions. The miliary and par of he cenral, regional and local governmen employees have heir pensions direcly managed by he cenral governmen (Clases Pasivas del Esado, CPE). Is expendiure amouned o 1.2% of GDP in I has been closed o new enrans as of All new civil servans since hen join he Social Securiy sysem. In 2013, employees under his sysem were around 930 housand persons and hey will be declining hroughou he projecion period driven by reiremen and moraliy. CPE also includes non-earnings relaed war pension amouning o less han 0.04% of GDP in Pensions from he Social Securiy are financed by conribuions (from employer employee self-employed and par of he unemployed 1 ) and by sae ransfers o finance minimum pension complemens. Pensions from he CPE sysem are financed by conribuions from he employees and from direc paymens of he cenral governmen. Pension benefis are axed as labour incom excep some disabiliy pensions (absolue permanen and grea disabiliy pensions). Compulsory social conribuions are excluded from he income ax base. - The non-earnings relaed basic scheme is graned, as a general rul o people wih income below a hreshold se every year in he Budge Law (annual in 2013 for he basic amoun). The benefi is means-esed and no previous conribuion is required. I is quaniaively of less imporance (0.1% of GDP for old-age pensions). b) Privae pensions are volunary (non-mandaory), supplemenary and cover boh individual and occupaional pension funds (48.3% individual and 51.7% occupaional of oal privae pension funds asses in 2013). Occupaional pensions include occupaional plans and collecive pension insurance plans (wih reiremen benefi purposes). Privae plans are funded and mosly defined-conribuion schemes. Occupaional privae pension schemes are agreed in he wage bargaining framework. They are usually financed by employers and employees. Privae pension benefis are also axed as labour income. Conribuions o privae pension plans enjoy a favourable ax reamen following he ETT principle (Exemp conribuion Taxed invesmen income and capial gains of he pension insiuion, Taxed benefis) wih he excepion of collecive insurance ha does no enjoy ax exempions. 1 All unemployed receiving benefi and subsidies if aged over 55. 4

5 I.2. Main pensions formulas 2 Back o index The calculaion mehod for pensions managed by he Social Securiy is earnings-based. The reference model used in he Ageing Repor 2012 (AR2012) ook ino accoun he 2011 pension reform (Law 27/2011), which is enering gradually ino force. a) Reiremen pensions: In order o be eligible for a conribuory reiremen pension 15 year of conribuions need o be recorded, and a leas 2 of hese in he las 15 years before he sauory reiremen age. The sauory reiremen age will gradually increase from 65 in 2012 o 67 in Workers wih conribuory careers of more han 38.5 years are allowed o reire a 65 wih a full pension. The pension benefi is calculaed as a percenage of he pensionable earning he regulaory base (RB). The RB is he average of las years conribuion bases. The period used o calculae pensionable earnings will gradually increase from he las 15 years o 25 years (by 2022). By 2022 he RB will be he average of he conribuion bases (CB) of 300 monhs prior o reiremen (divided by 350). The conribuion base (CB) is essenially he monhly earned income wihin hresholds (he lower bound depends on he occupaional caegory of he worker and he upper bound is he same for all workers). CBs corresponding o he 24 monhs jus prior o reiremen are compued in nominal erms. The remaining CBs are updaed according o he evoluion of he Consumer Price Index. Conribuion breaks are filled less generously han in he pas. The 48 mos recen monhs are compued using he minimum CB, and all he previous monhs using 50% of he minimum CB, insead of 100% of he minimum base. The conribuions o GDP raio is kep consan as behavioural changes are no modelled, alhough i mus be noed ha increasing he pensionable period in previous reforms (from 2 o 8 years in 1985 and from 8 o 15 years in 1997) incenivised longer conribuory records. In any cas a conribuion increase would no affec significanly he Social Securiy balance over he long run since i would be compensaed aferwards by a higher average pension. The percenage applied o he RB varies from 50% wih a minimum of 15 years of conribuion o 100% (increasing from 35 years in 2012 o 37 by 2027 wih he 2011 reform). The percenage applied o he RB also depends on penalisaions for early reiremen and premiums for lae reiremen. There are minimum and maximum conribuory pension benefis 3. Minimum pension complemens canno exceed he minimum non-earnings relaed pension (annual 5,108 in 2013 for he basic amoun). b) Lae reiremen: The 2011 reform increased premiums for lae reiremen: +2%, +2¾%, and +4% for an exra year, respecively, for careers below 25 year beween 25 and 37, and over 37. This adds o he normal accrual rae for year of conribuion and allows surpassing he maximum pension (hough no he maximum conribuory base ha is he highes upper limi). 2 See Par 4 for deails. 3 In 2013 he maximum pension benefi was 35,623 per year. Minimum pension benefis depend on pensioner age and household composiion (in 2013, 10,932 per year wih dependen spouse and over 65). In 2013, 27% of pensions and 21% of new pensions were minimum conribuory pension benefis. 5

6 Back o index c) Disabiliy pensions ake ino accoun he level and he cause of disabiliy, he age of he worker and wheher or no he worker is currenly employed and conribuing. Afer 65 years of age hey are regisered as reiremen pensions. d) Survivors pensions include widow(ers), orphans and oher relaives pensions. In he case of acive persons causing a survivor pension, conribuion requiremens are needed. The pension benefi for he widow(er) amouns o 52 percen of he deceased spouse's RB (in some cases 70%). For he orphan i is 20 percen of RB. For oher relaive he pension benefi amouns o 20 percen of he RB, bu i can be increased o 52 percen if here are neiher widow(er)s nor orphans. In any cas he oal pension benefi for he family canno exceed 100 percen of he RB. e) For civil servans pensions (CPE), for he miliary and par of cenral governmen employee he eligibiliy requiremens for old age pensions are 65 years of age and 15 years of conribuions. I includes reiremen, disabiliy and survivors pensions. Since 1997, civil servans can reire afer he age of 65 up o 70 on a volunary basis. Under he CPE schem early reiremen is possible a 60, provided workers have conribued for a leas 30 years. However, he pension calculaion is less favourable in general. The RB is fixed and indexed o prices and depends on he caegory he civil servan belongs o. The accrual rae for he pension benefi depends on he whole career. This sysem has been closed o new enrans as of I reforms Since he AR2012, wo major reforms have been adoped. Their impac was peer-reviewed by he AWG of April 1 s 2014 and endorsed by he EPC of April 8h They are legislaed in Royal Decree-law 5/2013, of March 15 h, on measures o favour prolonging he working life of elder workers and o promoe acive ageing, and in Law 23/2013, of December 23 rd, on he susainabiliy facor and on he index for pension revaluaion. The main measures are described below and explained wih greaer deail in Par IV of his fiche. a) Susainabiliy facor of he reiremen pension. The susainabiliy facor is an auomaic link beween he amoun of reiremen pension benefis and developmens in life expecancy of pensioners. I will be applied only once on each pensioner when deermining he iniial amoun of a new pension. I will come ino effec in b) New index for pension revaluaion (IPR). All conribuory pension including minimum pensions and civil servans pension will increase annually according o he Index for Pension Revaluaion, insead of he CPI indexaion radiionally used. I has enered ino force in 2014, immediaely afer he adopion of he law. The index is esablished annually in he Naional Budge Law a a level consisen wih a balanced budge of he Social Securiy sysem over he medium run. c) Modified condiions for early reiremen. Early reiremen for involunary reirees (collecive dismissals) requires a minimum reiremen age of 63 years (increasing progressively from 61 in 2013 o 63 in 2027) and a minimum conribuory period of 33 years (same as before). Early reiremen for volunary reirees requires a minimum age of 65 (increasing progressively from 63 in 2013 o 65 in 2027), a minimum conribuory period of 35 years (previously 35) and he compued benefi mus be greaer han he minimum pension. 6

7 Back o index Reducion coefficiens become siffer in mos cases as shown in he able below. New (and previous) reducion coefficiens for every year remaining unil sauory age <38.5 years >44.5 years Involunary early reiremen 7.5% (7.5%) 7.0% (6.5%) 6.5% (6.5%) 6.0% (6.5%) Volunary early reiremen 8.0% (7.5%) 7.5% (6.5%) 7.0% (6.5%) 6.5% (6.5%) Table 1a and 1b show he legislaed sauory reiremen ag he earlies reiremen age and he maximum accumulaed penalies in case of earlies reiremen, for boh volunary and involunary reiremen. Males and females are subjec o he same rules. In he case ha a worker wih a 40-year career decides volunarily o reire a he earlies possible age (63 years), he penaly is 15%, 7.5% for each of he wo years remaining o reach he sauory reiremen age. For involunary reiremen, he earlies reiremen age is 61 years and he annual penaly 7%, so ha he corresponding penaly is 28%. TABLE 1a Men - w ih 20 conribuion years Men - w ih 40 conribuion years Women - w ih 20 conribuion years Women - w ih 40 conribuion years Sauory reiremen ag earlies reiremen age and penalies for volunary early reiremen Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age , no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss 2% 2% 2% 2% 2% 2% % 15% 15% 15% 15% 15% 4% 4% 4% 4% 4% 4% 65 65, no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss 2% 2% 2% 2% 2% 2% % 15% 15% 15% 15% 15% 4% 4% 4% 4% 4% 4% TABLE 1b Men - w ih 20 conribuion years Men - w ih 40 conribuion years Women - w ih 20 conribuion years Women - w ih 40 conribuion years Sauory reiremen ag earlies reiremen age and penalies for involunary early reiremen Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age Sauory reiremen age Earlies reiremen age Penaly in case of earlies reiremen age Bonus in case of lae reiremen age , no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss 2% 2% 2% 2% 2% 2% % 28% 28% 28% 28% 28% 4% 4% 4% 4% 4% 4% 65 65, no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss no poss 2% 2% 2% 2% 2% 2% % 28% 28% 28% 28% 28% 4% 4% 4% 4% 4% 4% d) Modified he condiions for early parial reiremen. Access o early parial reiremen is resriced: For longer careers (longer han 36.5 years) he minimum age is increased progressively beween 2013 and 2027 from 61 o 63 years. For medium careers (beween 33 and 36.5 years) he minimum age is raised progressively from 61 o 65 years. For careers shorer han 33 year parial reiremen is no possible (before he reform only 30 years were required). 7

8 e) Oher elemens of he 2013 reforms. Back o index - Compaibiliy beween reiremen pension and work: The conribuory reiremen pension will be compaible wih any work, boh wage- and self-employed, carried ou by he pensioner, provided he pensioner has reached he sauory reiremen age; he pensioner is eniled o receive a full pension. The compaible work can be boh fullime and par-ime. The pension benefi will be equivalen o half of he amoun he pensioner would be eniled o. For hose already reired, he benefi will be half of he amoun being perceived up o ha momen, excluding minimum complemens. The pensioner will no have he righ o receive minimum complemens. He/she will be considered pensioner for all legal purposes. Once he labour conrac or he selfemployed aciviy is ended, he full benefi will be reesablished. During he working period, worker and employer will only be subjec o conribuions regarding professional coningencies and emporary disabiliy. Addiionally boh will be subjec o a special solidariy conribuion of 8%, which does no accrue pension benefis. - Measures o avoid discriminaion agains elder workers in collecive dismissals: In order o promoe he lenghening of working lif firms will have o make a special economic conribuion o he pension sysem when workers over 50 are laid-ou in collecive dismissals. I.4. "Consan policy" assumpions on pension revaluaion The model applies he no policy change assumpion. Tradiionally, pension benefis (of hose already reired) had been indexed o inflaion. Afer he inroducion of he 2013 reform all exising earning-relaed pensions are projeced o be indexed o he new Index for Pension Revaluaion (IPR). Non-conribuory pensions are sill linked o wage given ha hey are no covered in he 2013 reform and ha heir saring level provides room for improvemen. On he oher hand, new pensions have a minimum and a maximum hreshold, which are se annually in he annual Budge Law. In he pa minimum pensions have been racking wage while he maximum pensions have followed inflaion. As a consequenc he general rule is ha new pensions are projeced o be linked o wage wih he excepion of maximum new pensions which are assumed o follow inflaion. Moreover, all women new pensions are raised by an addiional consan coefficien reflecing he parial convergence o men in career duraion. On op of ha, new pensions are adjused by he 2011 reform and by he Susainabiliy Facor. Regarding he Conribuory Bases (CBs) used o compue new pension benefi hey are also deermined in he annual Budge Law. In recen year maximum CBs have increased significanly above maximum new pensions. As a consequenc all CBs are assumed o grow in line wih wages and conribuions over GDP are kep consan hroughou he projecion period. Imporanly, all he consan policy assumpions mus be considered wih cauion as hey projec a reasonable evoluion for he variables involved bu hey also reflec subjecive choices aken by he modellers among a pool of oher reasonable alernaives. In paricular, he projeced divergence beween CBs and new pensions and he assumpion of maximum and minimum new pensions growing above he IPR are key feaures of his model. 8

9 II: DEMOGRAPHIC AND LABOUR FORCES PROJECTIONS II.1. Demographic developmens Back o index The age pyramid and able 2 provide an overview of he demographic developmens unil The size of he populaion is expeced o remain broadly consan a around 46 million. This represens a sensible drop from he previous projecion round, which is explained mainly by reversed migraion flows in he firs par of he considered ime horizon. The age composiion shows significan changes. The old age dependency raio doubles is saring level a some poin of he projecion period, alhough i is on a downward rend since The increase in he dependency raio resuls from boh he increase in he size of he cohors ha reach he age of 65 and beyond (relaive o working age populaion) and he increase in life expecancy a 65. TABLE 2 Main demographic variables evoluion Peak year* Populaion (housand) Populaion grow h rae -0,4-0,3-0,1 0,2 0,2 0, Old-age dependency raio (pop65/pop15-64) 26,8 30,7 40,2 54,3 62,3 53, Ageing of he aged (pop80+/pop65+) 31,1 30,8 30,3 31,6 38,2 49, Men - Life expecancy a birh 79,5 80,5 81,9 83,2 84,4 85, Men - Life expecancy a 65 18,6 19,3 20,2 21,1 22,0 22, Women - Life expecancy a birh 85,2 86,0 87,1 88,1 89,1 90, Women - Life expecancy a 65 22,5 23,1 24,0 24,8 25,6 26, Men - Survivor rae a ,1 88,4 90,1 91,5 92,6 93, Men - Survivor rae a ,4 62,7 67,2 71,2 74,9 78, Women - Survivor rae a ,8 94,4 95,1 95,7 96,3 96, Women - Survivor rae a ,7 80,6 83,1 85,3 87,3 88, Ne migraion -310,9-79,0 87,5 225,2 305,6 275, Ne migraion over populaion change 1,7 0,5-1,4 3,0 3,2 9,

10 II.2. Labour force projecions Back o index Table 3 provides an overview of he main changes ha will ake place in he labour marke among elderly workers in he period from 2013 o I is remarkable ha labour force paricipaion for ages 55 o 64 will increase from 54 o 82%, and for ages 65 o 74 from 3.4 o 21%. TABLE 3 Paricipaion ra employmen rae and share of workers for he age groups and Peak year Labour force paricipaion rae ,2 67,8 79,4 81,8 81,8 82, Employmen rae for w orkers aged ,4 57,7 72,1 77,3 77,3 77, Share of w orkers on he oal labour force (aged 55-64) 80,1 85,1 90,8 94,5 94,5 94, Labour force paricipaion rae ,4 8,9 18,3 21,1 19,4 20, Employmen rae for w orkers aged ,1 8,4 17,6 20,6 19,0 20, Share of w orkers on he oal labour force (aged 65-74) 93,0 94,0 96,4 97,9 98,0 98, Median age of he labour force 39,0 43,0 46,0 44,0 42,0 43, Table 4 focuses on career lenghs and duraions of reiremen. The average effecive age of reiremen rises inensely in he ransiional phase of he 2011 pension reform and less so hereafer. The average working career is exended significanly as a resul. Despie higher reiremen age he duraion of reiremen will rise by more han 2 years due o a higher increase in longeviy. The proporion of early reirees o lae reirees will drop very significanly. TABLE 4a Labour marke enry ag exi age and expeced duraion of life spen a reiremen - MEN Peak year Average effecive enry age (CSM) (I) 22,6 22,1 22,1 22,1 22,1 22, Average effecive exi age (CSM) (II) 62,1 64,8 66,0 66,1 66,1 66, Average effecive w orking career (CSM) (II)- (I) 39,4 42,7 43,9 44,0 44,0 44, Conribuory period 39,6 40,7 41,8 41,9 41,9 42, Conribuory period/average w orking career 100,5 95,3 95,3 95,3 95,3 95, Duraion of reiremen ** 20,9 19,3 19,4 20,3 21,2 22, Duraion of reiremen/average w orking career 53,0 45,2 44,2 46,2 48,2 49, Percenage of adul life spen a reiremen*** 32,2 29,2 28,8 29,7 30,6 31, Early/lae exi**** 2,0 2,8 1,3 1,0 0,7 1, (** Duraion of reiremen is calculaed as he difference beween he life expecancy a average effecive exi age and he average effecive exi age iself. *** The percenage of adul life spen a reiremen is calculaed as he raio beween he duraion of reiremen and he life expecancy diminished by 18 years. **** Early/lae exi, in he specific year, is he raio of hose who reired and aged less han he sauory reiremen age and hose who reired and are aged more han he sauory reiremen age.) TABLE 4b Labour marke enry ag exi age and expeced duraion of life spen a reiremen - WOMEN Peak year Average effecive enry age (CSM) (I) 23,5 23,1 23,1 23,1 23,1 23, Average effecive exi age (CSM) (II) 62,1 65,8 66,5 66,6 66,6 66, Average effecive w orking career (CSM) (II)- (I) 38,5 42,8 43,5 43,5 43,6 43, Conribuory period 30,7 32,4 34,5 35,5 36,5 37, Conribuory period/average w orking career 79,6 75,8 79,3 81,6 83,8 86, Duraion of reiremen 25,2 22,2 22,1 22,9 23,7 24, Duraion of reiremen/average w orking career 65,4 51,9 50,9 52,6 54,4 56, Percenage of adul life spen a reiremen 36,4 31,7 31,3 32,0 32,8 33, Early/lae exi 1,3 1,9 1,0 0,8 0,6 0,

11 III. PENSION PROJECTION RESULTS Back o index III.1. Exen of he coverage of he pension schemes in he projecions. The projecion covers he following pension sysems: a) Conribuory Public Pensions: The model covers old-age and early reiremen, disabiliy and survivors pensions under he Social Securiy and he Civil Servans sysems. These include he complemens o minimum pensions (requiring a leas 15 years of conribuion). I also includes he SOVI regime (pensions for persons having conribued only before 1967) and oher fading pension schemes 4. b) Non-earnings relaed Public Pensions: These are non-earnings means-esed basic pensions 5. They accouned for 0.1% of GDP in Women accoun for 80% of oldage non-earnings relaed pensions. c) Privae pensions: Occupaional and personal individual pension funds (boh are volunary). In able 5, he difference beween ESSPROS and AWG public pension expendiure is shown. Discrepancies are explained by minor schemes no accouned for in AWG projecions such as former pension schemes linked o social assisance (e.g. LISMI for he handicapped) or complemens by local and regional governmens and by muual funds for civil servans. Moreover, ESSPROS excludes all insurance policies aken ou on he privae iniiaive of individuals or households solely in heir own inere i.e. privae individual pensions. Noe ha he disaggregaion beween public and privae pension expendiure remains unpublished and provisional. TABLE Eurosa oal pension expendiure 9,1 8,9 9,2 9,5 10,4 11,0 11,4 12,0 2 Eurosa public pension expendiure 8,9 8,7 8,8 9,0 9,9 10,5 11,0 11,6 3 Public pension expendiure (AWG) 8,6 8,4 8,5 8,7 9,6 10,2 10,8 11,5 4 Difference (2) - (3) 0,3 0,3 0,3 0,3 0,3 0,4 0,2 0,1 III.2. Overview of projecion resuls a) CSM model Eurosa (ESSPROS) vs. Ageing Working Group definiion of pension expendiure (% GDP) The Commission capured he 2011 reform in is CSM by adding 2.1 years o he effecive reiremen age beween 2013 and 2027, and leaving i consan aferwards. This increase was already included in he AR2012. On op of ha, he 2013 reform is expeced o increase he effecive reiremen age by 0.9 years beween 2014 and Up o 2027, he effecive reiremen age increases linearly by 0.7 years as a resul of resriced access o early reiremen as envisaged in RDL 5/2013. Beween 2027 and 2060 he susainabiliy facor generaes an addiional 0.2 year increase. As a consequence of he 2013 reform, he new paricipaion rae is 1.8 poins higher and GDP is 1.8% higher in 2060 han ha resuling from he CSM plus 2011 reform. 4 SOVI pensions can be awarded o persons accrediing conribuions before 1967 (bu who sopped working aferwards). Persons belonging o muualism pension schemes afer 1967 are awarded addiional conribuion years (assuming hey sared working a he minimum working-age). 5 Regulaion of hese pensions sared in 1990 (Law 26/1990). 11

12 b) Projeced oal spending Back o index The baseline public pension expendiure considering all he sysems will decrease afer he 2013 reforms by almos 1 p.p. of GDP from 2013 o The level in 2060 reaches 11.2% of GDP. Compared o he 2012 projecion expendiure in 2060 moderaes by around 2.6 p.p. of GDP. GDP level and oher aggregaes for he base year 2013 used in his projecion exercise follow he 1995 European Sysem of Naional and Regional Accouns (ESA-1995). TABLE 6 Projeced gross and ne pension spending and conribuions (% of GDP) Expendiure Peak year Gross public pension expendiure 12,1 12,1 11,5 12,2 12,7 11, Privae occupaional pensions 0,3 0,4 0,4 0,5 0,5 0, Privae individual pensions 0,3 0,5 0,6 0,7 0,6 0, Mandaory privae : : : : : : : Non-mandaory privae 0,3 0,5 0,6 0,7 0,6 0, Gross oal pension expendiure 12,8 12,9 12,6 13,4 13,7 12, Ne public pension expendiure 11,2 11,2 10,7 11,4 11,7 10, Ne oal pension expendiure 11,8 11,9 11,6 12,4 12,7 11, Conribuions Public pension conribuions 12,4 12,5 12,5 12,3 12,1 11, Toal pension conribuions 13,3 13,4 13,2 12,9 12,4 12, The peak year for gross public pension expendiures is 2047, in conras o he peak observed in 2053 in he previous projecion. The impac of he 2013 reforms is large enough so as o neuralize mos of he upwards pressure on he dependency raio up o From hen on, he moderaion in expendiure growh compared o he AR2012 is mainly explained by a more benign dependency raio. Table 6 shows he resuls of he occupaional and individual pension projecions. Under pruden assumpions and considering no policy change he expendiure for boh iems combined remains in 2060 around is iniial level of 0.8% of GDP. As for ne pension he effecive marginal ax rae (esimaed wih he wihholding ax rae) for public pensions is 6.8% and for privae pensions is 9.6% in 2013 and kep consan hrough he projecion period. Conribuions share of GDP is kep consan, which migh prove o be a conservaive assumpion if individuals decided o exend heir working careers in response o pension reforms. c) Projeced spending by ype of pensions In able 7 projecions by ype of pension are presened. The main iem is reiremen pensions which end o increase heir weigh on GDP as demographic pressures ensue. However, in he las decade he rend reverses and he expendiure o GDP raio diminishes hanks o he favourable evoluion of he dependency raio. Disabiliy pensions and survivor s pensions decrease hroughou he projecion period. The general scheme keeps is weigh on GDP roughly consan. The civil servans scheme decreases by 0.8 p.p. due o is phasing ou as no new employees will ener his sysem. The non-earnings relaed old-age pension expendiure over GDP is of less quaniaive imporance (0.1% of GDP). 12

13 TABLE 7 Projeced gross public pension spending by scheme (% of GDP) Back o index Pension scheme Peak year Toal public pensions 12,1 12,1 11,5 12,2 12,7 11, of which earnings relaed: Old age and early pensions 8,5 8,8 8,5 9,3 9,9 8, Disabiliy pensions 1,2 1,1 1,1 1,0 0,8 0, Survivors' pensions 2,4 2,2 1,9 1,9 2,0 1, Oher pensions : : : : : : : of which non-earnings relaed (including minimum pension and minimum income guaranee): Old age and early pensions 0,13 0,14 0,13 0,15 0,16 0, Disabiliy pensions : : : : : : : of which Oher pensions : : : : : : : Social Securiy scheme 10,8 10,7 10,2 11,0 11,7 10, Civil servans 1,2 1,2 1,2 1,1 0,8 0, Non-conribuory 0,1 0,1 0,1 0,1 0,2 0, III.3. Main driving forces behind he projecion resuls and heir implicaions for main iems from a pension quesionnaire a) Decomposiion of he raio of pension expendiures o GDP Tables 8 decompose he decrease in he public pension expendiure o GDP ino he impac, measured in percenage poins of GDP, of is main driver i.e. he dependency raio, he coverage raio, he benefi raio, he labour marke impac and a residual. The coverage raio and he labour marke impac are furher decomposed ino is componens. PensionExp = Depend. Raio xcoverage Raio x Benefi Raio x Labour Marke x Re sidual = GDP Pop 65 + NumberPensions AveragePension Pop20 _ = x x x 64 Pop20 _ 64 Pop65 + GDPperHourWorked HoursWorked The main upward driver of pension expendiure is he dependency raio hough is influence upwards diminishes afer 2040 and urns negaive afer The dependency raio double from 29% in 2013 o 58% in From 2049 onwards he raio declines from is peak of 68% and is conribuion o expendiure becomes negaive in he las projecion s decade. In he firs half of he projecion, he coverage raio decrease yielding a negaive coverage effec, because he 2011 reform resrics access o reiremen pension and also because he reduced prevalence of survivor s pensions. For reiremen pension he coverage increases in he second half of he projecions because of increasing female pension parly compensaing he former rend. The impac of he 2011 and 2013 reforms and demographic developmens pu downward pressure on he benefi raio and on he average pension. Finally, he employmen rae has an effec conducive o lowering expendiure o GDP in he firs half of he projecion, firs due o he reducion in he high unemploymen rae reached during he crisi and, aferward due o he pension reforms (ha increases old-age employmen raes) ogeher wih cohor effecs (younger cohors having a higher paricipaion rae for each age). 13

14 Back o index TABLE 8a Facors behind he change in public pension expendiures beween 2013 and 2060 using pension daa (in percenage poins of GDP) - pensions Average annual change Public pensions o GDP 0,0-0,5 0,7 0,4-1,4-0,9-0,005 Dependency raio effec 1,9 3,5 3,6 1,9-1,8 9,1 0,187 Coverage raio effec -0,1-0,6-0,3 0,0 0,3-0,7-0,016 Coverage raio old-age* 0,2-0,2 0,2 0,5 0,2 0,9 0,019 Coverage raio early-age* -1,8-1,4 1,6 0,4-1,6-2,8-0,064 Cohor effec* 0,5-1,2-4,2-4,1 3,1-6,0-0,149 Benefi raio effec 0,0-1,5-1,4-1,3-0,2-4,4-0,092 Labour Marke/Labour inensiy effec -1,6-1,6-0,9 0,0 0,2-3,9-0,079 Employmen raio effec -1,5-1,3-0,7-0,1 0,0-3,5-0,071 Labour inensiy effec 0,0 0,0 0,0 0,0 0,0 0,0 0,001 Career shif effec -0,2-0,4-0,2 0,1 0,2-0,4-0,009 Residual -0,1-0,3-0,3-0,1 0,0-1,0-0,004 * Sub componens of he coverage raio effec do no add up necessarily. TABLE 8b Facors behind he change in public pension expendiures beween 2013 and 2060 using pensioners daa (in percenage poins of GDP) - pensioners Average annual change Public pensions o GDP 0,0-0,5 0,7 0,4-1,4-0,9-0,005 Dependency raio effec 1,9 3,5 3,6 1,9-1,8 9,1 0,187 Coverage raio effec -0,1-0,6-0,2 0,0 0,3-0,6-0,013 Coverage raio old-age* 0,2-0,1 0,2 0,5 0,2 1,1 0,023 Coverage raio early-age* -1,8-1,4 1,7 0,5-1,6-2,4-0,057 Cohor effec* 0,5-1,2-4,2-4,1 3,1-6,0-0,149 Benefi raio effec 0,0-1,5-1,5-1,4-0,2-4,5-0,095 Labour Marke/Labour inensiy effec -1,6-1,6-0,9 0,0 0,2-3,9-0,079 Employmen raio effec -1,5-1,3-0,7-0,1 0,0-3,5-0,071 Labour inensiy effec 0,0 0,0 0,0 0,0 0,0 0,0 0,001 Career shif effec -0,2-0,4-0,2 0,1 0,2-0,4-0,009 Residual -0,1-0,3-0,3-0,1 0,0-1,0-0,004 * Sub componens of he coverage raio effec do no add up necessarily. b) Evoluion of he replacemen and benefi raios Table 9 shows he evoluion of various replacemen raios (RR) a reiremen, i.e. firs pension of hose who reire in a given year over an (economy-wide) average wage a reiremen, and various benefi raio i.e. he average pension compared o he average wage of he economy. The level should be aken wih cauion as i depends on he average wage used. The wage used is aken from INE (Encuesa Trimesral de Cose Laboral or ETCL). This wage has been impued also o he self-employed and is used for compuing boh replacemen and benefi raios. Direc comparisons wih he Theoreical Replacemen Rae (TRR) should also be avoided because of he wage definiion and because he TRR is calculaed for an individual wih full career a 65 and no breaks. Under such condiion he 2011 reform has no effec on he TRR. 14

15 Back o index The RRs a heir saring level are among he highes in he EU and are above heir respecive BR as expeced. A decline in he RRs is projeced due o he 2011 pension reform, o he susainabiliy facor and o he hreshold effec of he maximum new pension increasing wih price i.e. lagging behind wages. BRs are also expeced o decline driven by lower replacemen raios bu also by he IPR when se below CPI. The resuls presened in able 9 are influenced no jus by he 2011 and 2013 reform bu are affeced crucially by he consan policy assumpions and by he projeced developmens in key macroeconomic variable noably wages and inflaion. TABLE 9 Replacemen rae a reiremen (RR), benefi raio (BR) and coverage by pension scheme (in %) c) Dependency raios Public scheme (BR) 59,7 58,3 51,3 45,0 40,2 39,8 Public scheme (RR) 79,0 73,6 60,6 56,1 51,7 48,6 Coverage* 91,4 86,9 81,8 79,9 80,3 80,8 Public scheme old-age earnings relaed (BR) 65,4 65,1 56,2 47,6 41,6 40,2 Public scheme old-age earnings relaed (RR) 81,9 75,9 62,4 57,4 52,8 49,7 Coverage* 53,6 52,3 51,3 53,8 57,0 56,5 Privae occupaional scheme (BR) : : : : : : Privae occupaional scheme (RR) : : : : : : Coverage* 4,8 6,1 7,6 8,0 7,7 7,6 Privae individual scheme (BR) : : : : : : Privae individual scheme (RR) : : : : : : Coverage* 3,8 7,0 10,7 12,1 11,9 11,6 Toal (BR) : : : : : : Toal (RR) : : : : : : *Coverage is he raio of number of pensions w ihin he scheme and he oal number of pensions in he counry Tables 10 presen he public pension sysem and demographic dependency raios. Table 10a shows he resuls for all pensions and able 10b for public pensioners. As shown in able 10b, over he projecion horizon he number of pensioners increases by 65%, while employmen remains more or less consan. This leads o a 30% rise in he pension sysem dependency raio (or SDR) from 53% o 71%. This raio is he number of beneficiaries he labour marke is financing and capures he impac of demographic as well as of insiuional facors on he pension sysem, such as he increase in he reiremen age or more generally of paricipaion raes for all ages. The number of people over 65 experiences an increase similar o ha in he number of pensioners. However, he working age populaion ends o decline. As a resul, he old-age dependency raio (ODR) double from 27 o 53%, which can be used as a proxy of he purely demographic impac of an ageing populaion on he financial susainabiliy of he sysem. Comparing he SDR o he ODR, an indicaor of he efficiency of he pension sysem can be calculaed. The observed decline from 2013 o 2060 reflecs efficiency gains as insiuional facors capured in he SDR end o moderae he impac of he purely demographic ones. In oher word he sysem can be considered more efficien by 2060 as i achieves he same number of employees wih a much diminished and elder working age populaion. 15

16 Back o index TABLE 10a Sysem dependency raio and old-age dependency raio (public pensioners) Number of pensioners (housand) (I) 8.992, , , , , ,1 Employmen (housand) (II) , , , , , ,7 Pension Sysem Dependency Raio (SDR) (I)/(II) 52,5 52,2 56,5 68,4 79,2 71,1 Number of people aged 65+ (housand) (III) 8.347, , , , , ,9 Working age populaion (housand) (IV) , , , , , ,5 Old-age Dependency Raio (ODR) (III)/(IV) 26,8 30,7 40,2 54,3 62,3 53,2 Sysem efficiency (SDR/ODR) 2,0 1,7 1,4 1,3 1,3 1,3 TABLE 10b Sysem dependency raio and old-age dependency raio (all pensions) Number of pensions (housand) (I) , , , , , ,3 Employmen (housand) (II) , , , , , ,7 Pension Sysem Dependency Raio (SDR) (I)/(II) 64,0 66,7 76,5 94,3 108,3 96,9 Number of people aged 65+ (housand) (III) 8.347, , , , , ,9 Working age populaion (housand) (IV) , , , , , ,5 Old-age Dependency Raio (ODR) (III)/(IV) 26,8 30,7 40,2 54,3 62,3 53,2 Sysem efficiency (SDR/ODR) 2,4 2,2 1,9 1,7 1,7 1,8 Tables 11 presen he raio of pensioners o inacive populaion (Table 11a) and o oal populaion (Table 11b) by age group. Tables 12 do he same for women alone. In able 11b and 12b, he decline in he number of pensioners o oal populaion is remarkable for he age brackes and 65-69, reflecing he impac of recen reforms. For elder peopl he raios end o increas paricularly as women careers expand. The raios of pensioners o inacive generally increase mainly due o more women receiving a reiremen pension; he raios for boh genders end o converge. Pensioners in he age group under 65 are mosly under he disabiliy and survivor schemes. The fuure increases in he raios for hese groups in ables 11a and 12a mainly reflec a sharp reducion in inaciviy (he denominaor) and are no he resul of more people becoming dependen on hese schemes (he numeraor). The raios above 100% are due o he possibiliy of working and collecing a pension a he same ime. 16

17 Back o index TABLE 11a Pensioners (public scheme) o inacive populaion raio by age group (%) Age group -54 6,6 7,7 9,7 9,0 6,9 6,8 Age group ,5 48,6 76,5 101,2 99,3 93,8 Age group ,2 60,4 75,8 96,4 96,5 90,9 Age group ,6 94,3 86,9 96,4 101,5 96,0 Age group ,7 91,5 95,0 97,7 101,9 99,2 Age group ,1 87,3 96,0 96,3 96,3 98,5 TABLE 11b Pensioners (public schemes) o oal populaion raio by age group (%) Age group -54 2,4 2,6 2,9 2,5 2,3 2,3 Age group ,8 10,9 10,7 12,2 12,6 11,9 Age group ,0 26,3 21,0 22,4 22,4 21,1 Age group ,5 79,7 60,8 62,9 66,3 61,4 Age group ,7 90,1 90,8 91,8 95,4 92,7 Age group ,1 87,3 96,0 96,3 96,3 98,5 TABLE 12a Female pensioners (public scheme) o inacive populaion raio by age group (%) Age group -54 5,3 6,5 8,6 7,9 5,9 5,7 Age group ,3 35,0 62,8 106,4 104,4 96,9 Age group ,3 47,3 68,1 102,5 101,8 97,5 Age group ,3 76,1 80,2 91,5 99,5 94,0 Age group ,7 77,1 86,0 91,8 98,2 94,3 Age group ,6 81,0 89,2 94,3 96,4 99,9 TABLE 12b Female pensioners (public scheme) o oal populaion raio by age group (%) Age group -54 2,1 2,3 2,6 2,2 2,0 2,0 Age group ,7 9,7 9,5 10,8 11,1 10,3 Age group ,1 22,3 19,4 20,6 19,8 18,5 Age group ,7 65,9 57,0 59,8 63,9 59,2 Age group ,0 76,0 82,2 86,1 91,5 87,8 Age group ,6 81,0 89,2 94,3 96,4 99,9 d) Decomposiion of new pension expendiure A decomposiion of he average new pension of he reiremen Social Securiy pensions ries o assess he consisency of he projecion (able 13a, b and c). New public pension expendiure is he produc of he average conribuory period, average pensionable earning average accrual rae he number of new pensions and he susainabiliy facor. I has o be aken ino accoun ha i relies on he Muesra Coninua de Vidas Laborales (or MCVL, a sample of wo million regisries provided by he Minisry of Employmen and Social Securiy) for he pensionable earnings and years of conribuion s saring poins while he average new reiremen pension is he observed in The average new pension calculaion is driven upwards by he average conribuory period (which ends o increase wih increased female paricipaion and wih reform-induced behavioural response) and pensionable earnings (which evolve in line wih produciviy). On he oher hand, a declining accrual rae and he susainabiliy facor pu downward pressure on he pension benefi for new enrans. 17

18 Back o index The average conribuory period increases by 3.2 years. This is due o pension reforms (especially he 2011 reform) and o he increase in job he increase in he female average conribuory period linked o higher paricipaion. In fac, conribuory careers of women increase by 6.8 year compared o a 2.4 year-increase for men. This assumpion is consisen wih women reducing by half he disance in working lives wih heir male peers (from 9 o 4.5 years). Pensionable earnings (regulaory base or RB) end o increase wih wages. The gap on pensionable earnings is assumed o remain consan (wih earnings for women equal o 76% men s earnings). Closing he gender gap in wages could also conribue o closing he gender gap in pension benefis. The susainabiliy facor is effecive since 2019 and shows a linear decline since hen, from 100% o 84%. Furher deails can be found in Par IV of his fiche. The effecive accrual rae akes ino accoun he rules affecing he percenage applied o he pensionable earnings (he legal accrual rae), penalisaions and premiums for early and lae reiremen, composiion effec complemens o minimum pensions and maximum hresholds. The effecive accrual rae in ables 13 diminishes significanly hroughou he period I is compued as he average benefi of new pensions divided by he average conribuory career, he monhly average pensionable earnings (Regulaory Bas RB) and he susainabiliy facor (SF). AvNewPension Accrual = Career * RB * SF The accrual rae is obained as a mere applicaion of he formula. However, using an average may disor he picure by underesimaing he effecive accrual rae for workers wih careers below he 37 years required o ge a full pension benefi. Afer 37 years of conribuion he accrual rae is close o null and increasingly a higher share of workers will reach such a long career. For male he underesimaion of he effecive accrual rae for individuals wih shor careers is greaer, given ha more men have a conribuion record above 37 years. 18

19 Back o index Finally, he number of new pensions is linked o he CSM exis from he labour marke. A peak is reached in he 2040s due o he baby-boom effec. Compared o he AR2012, he number of new pensions is significanly lower by 2060 as a resul of more moderae populaion growh hroughou he projecion period and, o a lesser exen, of he 2013 pension reform. TABLE 13a Projeced and disaggregaed new public pension expendiure (old-age and early earningsrelaed pensions) New pension I Projeced new pension expendiure (millions EUR) 2.850, , , , , ,4 II. Average conribuory period 36,6 37,7 38,9 39,1 39,4 39,7 III. Monhly average pensionable earnings 1.541, , , , , ,0 IV. Average accrual raes (%) 2,3% 2,1% 1,7% 1,7% 1,6% 1,6% V. Susainabiliy/Adjusmen facor 1,0 1,0 0,9 0,9 0,9 0,8 VI. Number of new pensioners ('000) 314,2 320,4 391,8 499,3 405,4 297,2 VII Average number of monhs paid he firs year 7,0 7,0 7,0 7,0 7,0 7,0 Monhly average pensionable earnings / Monhly economy-w ide average w age 80% 80% 80% 80% 80% 80% TABLE 13b Disaggregaed new public pension expendiure (old-age and early earnings-relaed pensions) - MEN New pension I Projeced new pension expendiure (millions EUR) 2.074, , , , , ,6 II. Average conribuory period 39,6 40,7 41,8 41,9 41,9 42,0 III. Monhly average pensionable earnings 1.660, , , , , ,5 IV. Average accrual raes (%) 2,2% 2,0% 1,7% 1,6% 1,6% 1,5% V. Susainabiliy/Adjusmen facor 1,0 1,0 0,9 0,9 0,9 0,8 VI. Number of new pensioners ('000) 207,5 195,9 217,2 273,0 212,4 159,9 VII Average number of monhs paid he firs year 7,0 7,0 7,0 7,0 7,0 7,0 Monhly average pensionable earnings / Monhly economy-w ide average w age 86% 86% 86% 86% 86% 86% TABLE 13c Disaggregaed new public pension expendiure (old-age and early earnings-relaed pensions) - WOMEN New pension I Projeced new pension expendiure (millions EUR) 776,5 991, , , , ,8 II. Average conribuory period 30,7 32,4 34,5 35,5 36,5 37,5 III. Monhly average pensionable earnings 1.266, , , , , ,8 IV. Average accrual raes (%) 2,7% 2,4% 2,0% 1,9% 1,9% 1,9% V. Susainabiliy/Adjusmen facor 1,0 1,0 0,9 0,9 0,9 0,8 VI. Number of new pensioners ('000) 106,7 124,5 174,6 226,3 193,0 137,3 VII Average number of monhs paid he firs year 7,0 7,0 7,0 7,0 7,0 7,0 Monhly average pensionable earnings / Monhly economy-w ide average w age 66% 66% 66% 66% 66% 66% 19

20 III.4. Financing of he pension sysem Back o index Table 14 shows he revenue side of he sysem. Employer conribuions grow in line wih GDP. The Employee and Sae conribuions increase a a slower pace mainly due o he fac ha hey include he conribuions for he special scheme for he civil servan which end o reduce heir size as he scheme phases ou. On he conrary, he Employee and Sae conribuions for he Social Securiy grow in line wih GDP. Regarding ransfers for complemens o minimum pensions wihin he Sae conribuion, hey have been rising srongly up o 2013 because he cenral governmen has been increasing is funding share of his elemen unil reaching 100% in TABLE 14 Revenue from conribuion (Millions), number of conribuors in he public scheme (in 1000), oal employmen (in 1000) and relaed raios (%) Public conribuion , , , , , ,2 Employer conribuion , , , , , ,6 Employee conribuion , , , , , ,0 Sae conribuion , , , , , ,5 Number of conribuors (I) , , , , , ,7 Employmen (II) , , , , , ,7 Raio of (I)/(II) 1,0 1,0 1,0 1,0 1,0 0,9 III.5. Sensiiviy analysis Table 15 presens he effec on pension expendiure under alernaive sensibiliy shocks. The resuls are expressed as deviaions in he expendiure o GDP raio wih regards o he baseline scenario. If he shock considered increases (decreases) expendiur he resul is wrien in red (green). TABLE15 Public and oal pension expendiure under differen scenarios (p.p. deviaion from he baseline) Public Pension Expendiure Baseline 12,1 12,1 11,5 12,2 12,7 11,2 Higher life expecancy (2 exra years) 0,0 0,0 0,0 0,2 0,3 0,1 Higher lab. produciviy (+0.25 pp.) 0,0-0,4 0,0-0,6-1,1-0,7 Low er lab. produciviy (-0.25 pp.) 0,0 0,0 0,1 0,3 0,5 0,2 Higher emp. rae (+2 pp.) 0,0-0,2 0,0-0,1-0,2-0,1 Higher emp. of older w orkers (+10 pp.) 0,0-0,5 0,0-0,4-0,2-0,1 Low er migraion (-20%) 0,0 0,0 0,0 0,2 0,5 0,2 Risk scenario 0,0 0,0 0,1 0,3 0,5 0,2 Policy scenario: linking reiremen age o increases in life expecancy 0,0 0,0 0,0-0,3-0,9-0,8 Toal Pension Expendiure Baseline 12,8 12,9 12,6 13,4 13,7 12,1 Higher life expecancy (2 exra years) 0,0 0,0 0,0 0,2 0,3 0,2 Higher lab. produciviy (+0.25 pp.) 0,0-0,4 0,0-0,7-1,1-0,7 Low er lab. produciviy (-0.25 pp.) 0,0 0,0 0,2 0,4 0,6 0,3 Higher emp. rae (+2 pp.) 0,0-0,2 0,0-0,1-0,2-0,1 Higher emp. of older w orkers (+10 pp.) 0,0-0,5 0,0-0,4-0,2-0,1 Low er migraion (-20%) 0,0 0,0 0,0 0,2 0,5 0,2 Risk scenario 0,0 0,0 0,1 0,3 0,5 0,3 Policy scenario: linking reiremen age o increases in life expecancy 0,0 0,0 0,0-0,3-0,9-0,8 20