The Actuarial Balance Sheet for Pay-As-You-Go Finance: Solvency Indicators for Spain and Sweden

This paper provides the first estimate of the actuarial balance of the Spanish contributory pension system for the old-age contingency, based on official data. The main accounting entries are developed from the principles of double-entry bookkeeping. The novel entry in the balance sheet, entitled the ‘contribution asset’ or ‘hidden asset’, is at the centre of the theoretical discussion. A comparison between the official balance sheet for the Swedish notional account system and our balance sheet for the Spanish contributory pension system is also provided. The main finding is that the Spanish pension system has an insolvency rate of 31.4 per cent. The policy implication is that unless curren…