Pension plans lose 11,000 million euros in just half a year

After the double blow to the tax incentives for private savings that the Government has dealt in the General Budgets of 2021 and 2022, this year was called to be the one that really discounted the impact on the behavior of the sector of private pension plans. The cut in deductions in Personal Income Tax (IRPF) for individual plans has meant a change in trend that has begun to empty these financial savings instruments. And to this is added a year of uncertainty in the financial markets that has undermined the profitability of the plans and underpinned the fall in assets and loss of business in the sector. Without going any further, in the first six months of 2022 alone, the sector has lost almost 11,000 million euros from pension plans and complementary social security instruments in Spain, 8.5% of the total under management. Of this money that the private savings sector has already lost, 8,199 million correspond to individual pension plans, another 2,625 million have been lost to employment plans and 77.6 million belonged to associated plans. In this way, the volume of assets stood at 117,095 million euros, which represents a decrease of 6,573 million euros in the second quarter of the year and is equivalent to 5.3% less than at the end of March. And far from the 127,998 million euros that it accumulated at the end of 2021. It should be remembered that the pension plans as a whole closed the first half with a negative return of 6% at one year due to the “persistent high volatility in the financial markets due to geopolitical and inflationary tensions and fears of a recession”, which caused corrections in the stock and bond markets. Desktop code Image for mobile, amp and app Mobile code AMP 1200 code APP code Not surprisingly, this fall in wealth, far from responding to a conjunctural element of the economy that results in a greater need for savings, is closely linked to the fiscal blow that the Government has applied to individual plans, in favor of employment plans. But with a nuance, this displacement of incentives occurs when the implementation of employment plans is still residual in Spain. As a result, we are witnessing a period in which private plans have already lost all fiscal attractiveness and it has not yet been possible to generalize the implementation of savings instruments within the framework of companies. The result of this misalignment in the policies applied by the Government: a drop in contributions by savers of 16%, which is added to the 31% drop experienced in 2021. It should be remembered that last year was the first in which tax incentive cut was applied. In the 2021 Budget, a 75% cut was made in the amount that the taxpayer can deduct from personal income tax for contributions to individual plans, which went from 8,000 euros to 2,000 euros. Then it was established that the exemption for contributions to employment plans would be 8,000 euros and in no case could it exceed 10,000 annual euros of relief. Collapse in contributions This first reduction in incentives underpinned a drop in net contributions (contributions less benefits) of 40% at the end of 2021 (-269 million euros). The second turn of the screw that the Executive gave to the taxation of savings and that is being applied this year, with an additional reduction of the incentives to private plans of 25%, leaving the maximum deduction in IPRF for contributions at 1,500 euros -and in 8,500 euros for employment plans-, has caused another drop in contributions of 185 million in the first half of the year (-16%). And if we look at the net contributions, the flight recorded in the same period last year has doubled. In mid-2021, the net contributions were already negative - there was a greater volume of benefits - and the flight amounted to 275 million euros. This year, the figure is already around 505 million euros, almost double. As indicated by the data published by Inverco, if we add the fall in contributions in the last year and a half, in which the transfer of tax incentives has been deployed, contributions to individual plans have decreased by 2,200 million euros. MORE INFORMATION Escrivá maintains the fiscal blow to private pension plans that requires softening the PP Thus, the assets of the individual system (corresponding to the third pillar of retirement savings) closed June at 81,123 million euros, 5.8% less that in March, with 7,413,253 participants, at the same time as the employment (second pillar) closed the semester at 35,166 million euros, 4.1% less than the previous quarter with 1,909,611 accounts. For its part, the associated system ended the sixth month of the year at 805 million euros, which represents a decrease of 6.1% compared to March, with a total of 52,376 accounts.

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