The purpose of this paper is to define and measure the actuarial deficit of a pension system. To accomplish this aim, first, a theoretical model is developed to estimate the implicit debt through two different methods (“Retrospective method” and “Prospective method”). Second, a new measure of the imbalance of the Social Security system is defined from a strictly actuarial viewpoint. This new measure is related to the estimated net present value. Third, the model developed is adjusted to the available aggregate data in most countries in order to calculate the amount of the implicit Social Security debt through the two different methods. Fourth, this model is applied to the general retirement pension system (“Régimen General”) of the Spanish Social Security to measure the actuarial imbalance of the system for two consecutive years, 2002 and 2003. Finally, the authors present different alternatives to rebalance the system.

Key words: implicit debt, Spain, retirement pension, pay-as-you-go, Social Security.
JEL Classification: H55, J26.