Sat. Feb 29th, 2020

Doubts about the sustainability of public pensions leads private plans to record numbers

The uncertain future that threatens the sustainability of the public pension system has revitalized workers’ interest in private plans, which last year reached a new historical record of equity, with 116,419 million euros, which represents 9,533 million more than a year and 8.9% growth, according to the annual report of the Collective Investment Institutions (Inverco) presented yesterday. In addition, 2019 closed with the best profitability of those plans in the historical series, with an average of 8.8%. Numbers that support the idea that the profitability of private savings for retirement begins to be attractive enough to invest, in fear that public pensions may deteriorate as the population pyramid reverses the balance between active population and pensioners Therefore, the individual contribution – personal of each worker – to these private funds increased by 13% in the last twelve months, reaching 4,039 million.

However, the contributions to the plans managed through the companies, whose contributions decreased by 10%, did not work in the same way, mainly because many of the beneficiaries of these plans that started in the 90s “have begun to retire, because what the loss of patrimony is conjunctural ”, they stated from Inverco.

Despite these figures, Spain is still far from the world average, since only 0.5% of the total is allocated to this type of savings, and the equity of the funds with respect to the Gross Domestic Product (GDP) is of just 8.8%, while the weighted average is 53.3%. For Ángel Martínez-Aldama, president of Inverco, “the rate of replacement of pensions in Spain – the percentage of income in retirement with respect to income contributed as active workers – is very high, 72.3%, and goes to fall abruptly in the coming years », so lower pensions will be charged. Therefore, Inverco points out that the Government must “improve the taxation of pension plans and give information to future retirees about what the remaining pension will be, so that they can take the necessary measures to complement the public benefit.”

On the other hand, Inverco expects the assets of collective investment institutions (funds and investment companies) and pension funds to grow this year by 5.6% in Spain, to 653,000 million euros, 533,000 million by volume of assets of collective investment institutions – 6.2% more – and 120,000 million of pension fund assets – an increase of 3.1% -, less enthusiastic forecasts than in 2019, where all records were broken . The report predicts a return of around 3%, below the 7.2% recorded in 2019, which has been the highest percentage of the historical series. As for pension funds, the association expects a return of between 2.5% and 3.5%, also lower than in 2019, which was 8.8% and reached a record level.


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