Spanish Pension System

SPANISH PENSION SYSTEM




Sandra Vázquez Rodríguez
Course: Public Finance
ID: 10008643
CONTENTS

1. Introduction
2. Spanish Pension System
2. The changing demographics of the Spanish and European population1. Pyramid schemes are defined by:


3. Types of retirement

4. 4. Spanish current reform of the pension system

5. Conclusion
6. Bibliography


1.INTRODUCTION
The aging population is inevitable and irreversible in all societies, causing a greater impact on those that are more advanced economically.
Spain is this case. This process has begun(began) later than othercountries but had the
greatest impact, as the decline in birth rate, longer life expectancy and increased purchasing power of pensions have been decisive.
The demographic system of most European countries has experienced a profound transformation for several decades characterized by the above and also by a profound aging of international migration flows.
The pension reform that the Governmenthas negotiated with social partners, in a process that has reached a good results introduces significant changes to people who have the sustainability of our system.
The objective of the reform is to ensure the financial sustainability of the oldest pillars of our “welfare state”. When in 1919 Spain was joined the Workers' Retirement Required, our country took the first step of a journey thathad taken a long walk. First, we get all our workers who were entitled to a pension and even those who had not been recognized for their years of work because of the war. Then we learned tremendously extend of this solidarity effort that the elders did who had not formally contributed to the system but they had the right not to grow old in poverty. Also we agreed to extend pensions to citizens whocould not work down, by covering disability (temporary or permanent), a development was also essential and it preceded the Law Unit. And finally, the system has integrated and coveraged giving equal rights to all foreign workers who came to our country during the growing season, and have helped expand the surplus after recent years of economic crisis. Those workers still have our Social Security.2. SPANISH PENSION SYSTEM

Def: The Spanish pension system is administered by the State in order to ensure social protection of dependent people, in case of retirement, accident, illness, etc...
There are two types of pension systems:
- Public
- Private
The funds necessary to finance these payments come from the contribution of the workforce.
Workers are responsible for paying pensions.The state retains a proportion of both Direct Salary (wages) and Indirect Wage (partially paid by companies).
The idea is that by retaining a small portion of their salaries the majority of the population will be able to meet pension payments.
But looking at the demographic changes we realize that this system is Unsustainable.
2.1 Population pyramids

At present (as in 2010) we have acontractive pyramid (also called onion pyramid).It is characterized by that the base is narrow, there is little birth, while the adults and the old population are very numerous. Also, the population is aged. It is typical for European countries.

2.2.The changing demographics of the Spanish and European population
Over the coming decades, Spain will experience significant demographic changes thatwill affect the sustainability of its pension system. Demographic projections show that there will be an increase in life expectancy: 65-year-old population will live four years more in 2050 than today. Now, the number of people over 65 is 7.9 million, 17% of the total population.
The progressive aging of the population is also reflected in a lower replacement or disturbing relationship between...