By Carlos Vidal-Meliá

We apply an actuarially grounded Notional Defined Contribution (NDC) counterfactual to benchmark Spain’s pay‑as‑you‑go Defined Benefit (DB) pensions using administrative microdata (MCVL, 2015–2023). From observed contribution histories we reconstruct notional capital, price DB liabilities with contingency‑, gender‑ and income‑stratified mortality—adding severity‑ and onset‑adjusted tables for disability—and quantify actuarial fairness via money’s‑worth ratios (MWR), real internal rates of return (IRR), and notional–cost gaps. A unified treatment of retirement, disability, and survivor reversibility employs joint‑life valuation.Results show pervasive actuarial deficits (median MWR > 1). Retirement pensions are generous—especially for women, reflecting longevity—yet the largest imbalances arise in disability, where shorter careers and formula design yield MWRs often between 2 and 5 and double‑digit real IRRs. Disability is the often‑overlooked “elephant in the room” of pension reform debates. Incorporating 52% survivor reversibility materially increases liabilities—more for men given spousal‑age assumptions—while leaving relative generosity patterns largely intact. Returns decrease with contribution length, implying systematic redistribution toward short or fragmented careers. Recent reforms only modestly attenuate these gaps.Findings reveal hidden intra‑ and intergenerational transfers that challenge solvency and transparency when retirement is analyzed in isolation. Policy implications include integrating all contingencies in actuarial oversight, separating contributory from redistributive finance, and accelerating alignment with NDC principles while preserving targeted adequacy instruments.

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