For decades the system of pension indexation applied in Spain, based on the CPI, has been focused on maintaining the purchasing power of pensions regardless of, except for occasional freezes, its impact on the financial sustainability of Social Security. The Social Security reform adopted in 2013 (Law 23/2013) introduces a new system that involves a radical change in revaluation policy by linking the indexation of pensions to the budgetary balance of the system. This paper discusses the impact of the new pension indexation rule (PIR) on the purchasing power of pensioners and its ability to financially balance the pension system under different economic growth scenarios.

Key words: Spanish pension system, pension indexation rule, pensioner purchasing power.
Clasificación JEL: H55, J26.