"The aim of this article is twofold: to demonstrate the actuarial imbalance in the Spanish pension system in its current form; and to measure the degree of aggregate economic risk to which pensioners are exposed when applying formulas for the calculation of retirement pensions based on notional accounts. The model used generates scenarios for various periods encompassing some 10,000 different permutations of the macroeconomic indices needed to calculate such parameters as initial pension, earnings replacement rate, or internal rate of return and value at risk. The findings are analysed both objectively and subjectively. The main conclusions are that if the projections for the macroeconomic indices used bear only a minimal resemblance to reality, the pension system will accumulate further financial imbalance in the future that will force it either to reduce initial pensions considerably or to make some radical adjustments to the parameters. In terms of risk, for beneficiaries with high risk aversion the preferred formulas would be those based on future variations in wages with a constant pension amount in real terms; on the other hand, those less averse to risk would prefer formulas that generate a smaller initial pension but one which grows in real terms with subsequent changes in wage levels."

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