 3.

2 Reforms to curb rising expenditure 

  Strict implementation of the 2013 reform would imply a reduction in the benefit rate through the sustainabi
lity factor and the Pension Revaluation Index (PRI). 
 Some argue that the PRI should be maintained to ensure that minimum pensions are indexed to inflation an
d do not lose purchasing power, although the rest would. 
 It is estimated that this measure would have an average impact of 0.43 percentage points of annual GDP bet
ween 2017 and 2057, according to De la Fuente et al. (2017).
 When resources cannot be increased for the pension system, there are
alternative measures that could decrease the pension replacement rate while promoting a
more contributory system. 

 This would have positive effects on the labor market, income, and incentivize longer working lives,
as well as facilitate pension saving decisions. 
 One such measure would be to increase the number of contributory years considered when calculating retir
ement pensions, possibly even the entire working life. This would bring Spain in
line with other European countries like Finland, Poland, Portugal, and Sweden. 
 While this change would generally lead to lower average pensions, it would have a greater impact on higher-
income individuals, as the employment income profiles of lower-
income workers are flatter, but these measures are limited.
 One way to control spending in the pension system is to raise the retirement age further, which has been
proposed in recent years.  This is justified by factors such as longer life expectancy, later labor market entry,
less physically demanding work, and improved physical condition in older age groups. 
 Some countries have even linked the statutory retirement age to future changes in life expectancy as
for example, Italy and Portugal.
 Another example would be the case of Spain to increase retirement from 65 to 67. The effective age
of retirement has been increasing in recent years due to a net rise in the retirement age for each type
of retirement and, second, a negative contribution from the change in weight of the different types
of retirement, some of which occur below the statutory age. The 2011 reform has had a limited impact
on retirement age,
 Workers who take early or partial retirement tend to have lower retirement ages, but also
longer contribution periods and higher regulatory bases.

 Partial retirement seems as
a smooth way to transition from the labor market to retirement, allowing people to work part-time while dra
wing an early pension. 
 The modification of certain employment conditions, such as working hours and wages, during the latter year
s of a working life could be important to promote more flexible environments. 
 Some countries have adopted notional defined contribution account systems to make the return associated 
with contributions over a working life explicit, increase transparency, and support decision-
making when retiring, although they do not eliminate the need to define the pension benefit rate in accorda
nce with the funds available.
 3.3 The role of private saving 
 funds of the pay-as-you-go public contributory system for retirement
 The income arising from private voluntary saving makes up part of the funds available during retirement in o
ther European economies,
 The role of real estate in this higher level of wealth is striking; (graphs)
 system of tax incentives for contributions to pension schemes and the role of the mobilisation of real estate 
savings stand out.
 Tax deferment: contributions to pension schemes deducted from taxable income
 The AIReF report: ax relief on their contributions to pension schemes in 2016
(regressive tax treatment). These contributions involve an estimated tax cost of €450 million, pension funds a
mount to a small part of household wealth because of the high fees charges.
  if the size of these savings justifying their tax cost? although these incentives give rise to new savings, their si
ze is unknown and there was a loss of tax revenue associated with deferral.
In Spain, of every euro contributed , on average, 25 cents were new private savings
 Alternatives to eliminate the tax cost of pensions without affecting savings: 
1. reduce the rate for deducting contributions from taxable income, limit the maximum amount of contribution
s  that is tax-deductible
2. concentrate tax deferment in occupational pension schemes
3. contributions to personal schemes being topped-up by the government.
4. prepayment of tax
Conclusion: reducing its tax cost and increasing its efficiency for additional savings for retirement.