The ranking of pension systems in the world relegates Spain to the middle of the table. This index, prepared by consultancy Mercer and the CFA Institute, evaluates the major pension systems of each country in the world based on three pillars that define retirement benefits in each: adequacy, sustainability and integrity. These three notions, weighted, give a score and a position in the ranking. Spain improved slightly from the previous year, with a score of 63.3 points, thanks to greater protection of minimum pensions. Sustainability, with a resounding failure, weighs down the two other notable aspects: Spain occupies 26th place out of 48. Experts warn that “no retirement system is perfect,” but there are several models to follow.
The Spanish pension system is pay-as-you-go, meaning that benefits are financed by the working population, with social contributions. In part, the system also relies on the transfer of taxes to cover a non-contributory part of the bill which does not correspond to Social Security: minimum pensions so that the most vulnerable have a basic resource.
The Netherlands returns to the top of the list, with Iceland And Denmark occupying second and third place respectively in the Global Retirement Index prepared by Mercer and the CFA Institute, each with its own strength but coinciding with powerful systems due to the diversification of retirement income in support of the financial ecosystem .
The Dutch have exemplary private and collective savings system that exists in the Netherlandswith a strong presence of professional pension plans (the second pillar), now generalized to individual plans. THE Icelandic They have a model of capitalization of their pensions, with investment of the contributions of each worker. and the the Danes They have a very diversified system, where retirement income comes from the basic public pension, generated during their professional career, and from the individual savings that each worker decides to contribute to their “piggy bank”.
Spain seems distant, where the generosity of benefits and the credibility of the system predominate. Both aspects have a high rating, remarkable. But they do so at the cost of having the lowest sustainability in the Eurozone, just behind Italy (negatively), although Greece is not part of the index. Developed Eurozone economies generally fail on sustainability, a index which highlights demographic change and the astronomical imbalance that the retirement of the “baby boom” will cause.
“Spain continues to be among the countries with the lowest scores in the world ranking,” says Miguel Ángel Menéndez, director of the social protection area at Mercer Spain. The expert indicates that the sixteenth edition of the report highlights “the notable diversity and positive characteristics of many pension systems, while emphasizing that none is perfect and that all have certain shortcomings.”
The public share which covers retirement is the first and almost the only pillar of pensions in Spain, where there is little savings culture for this stage of life and where employment projects are very little developed. Population coverage is low, indicates the cabinet. East in complementary savings where Spain has the opportunity to be an effective student and improve their grades.
The British resorted to ‘automatic registration’ (automatic affiliation) to pension plans, a behavioral economics tactic inspired by authors Tahler and Benartzi which introduces the worker by default into a retirement savings plan. This action makes it more difficult for the employee to decide to opt out of the plan and not save. Although you have this option, it is more complicated to take negative action and they usually don’t do it. The report recommends that Spain introduce this formula to improve the number and population of savers. Thus, it would be possible to diversify the income of (future) retirees.
The report also highlights the labor market participation of workers close to retirement age as an area that could be improved. Spain suffers from an endemic problem: it wastes older workers, with a strong culture of early retirement. The efforts of the latest reforms in this area have aimed to raise the real retirement age, more in line with the legal age of 65 or 67, depending on the years of contribution. To achieve this, there are a series of sanctions for early retirement and certain “rewards” for those who decide to delay retirement or partially leave the labor market.
“The index serves as a reminder a significant portion of the gaps that persist in providing long-term financial security and advice to people. The need for accredited and ethical financial advisors is once again highlighted, which is why we have launched new initiatives to encourage private investment,” concludes Margaret Franklin, financial analyst, president and CEO of the CFA Institute.
