In Spain, talking about pensions at this time is almost unavoidable, not only because of the specific circumstances that the country is experiencing, but because the higher expectations of longevity make maintaining a good quality of life in all aspects after retirement a priority. However, approximately only 20% of the population (more than 9.5 million people) have contracted exclusive retirement products.
In this sense, the European statistical office, Eurostat, concludes that neither the culture of savings nor the planning of long-term finances are consolidated in Spanish society, with the savings rate in families at the end of 2018 being only 4.9%, 60% less than the average of the countries of the European Union (12.1%).
In Spanish society the culture of saving in finance is not consolidated, according to Eurostat data
This data is especially sensitive in an environment of population aging (each year the life expectancy is increased by 2 months) and in which the future sustainability of the public pension model faces chronic demographic risks (growth rate negative vegetative), economic (for the financing of the system through a distribution model) and labor (unemployment rates of 14% and temporality of 27%).
The bases and conditions on which the current model was set have changed substantially, so that the debate on the future of public pensions is more open than ever. It is important that the public pension system continues to be the first pillar of the forecasting model in our society.
A study places Spain at the tail of the Eurozone in economic well-being at the time of retirement
But it is necessary that the system as a whole be reviewed and adjusted, both for the part of its financing and for its level of coverage, in such a way as to guarantee the sustainability of a long-term social security model. In the pension systems of the countries of the European Union reforms have already been undertaken such as delaying the retirement age, increasing the number of years to calculate the retirement pension, defining the initial retirement pension based on life expectancy at At the time of retirement, disconnect the revision of the CPI pensions and link it to other factors or enhance savings from companies.
Think about retirement
Undoubtedly, it is necessary to take measures and that these start from a social consensus between the main economic and social agents, and citizens must be clearly informed of the risks of the system and its implications. The years have gone by and the in-depth reforms have not been carried out, some have even been delayed or reversed, mostly motivated by political and social pressures, but for this debate to be assumed by the population it is essential to inform it.
A study by Natixis IM puts our country at the tail of the Eurozone in economic well-being at the time of retirement. Globally, it ranks 31st out of a total of 44 countries, and descends for the first time from the top 30 positions in the ranking. Specifically, Spain is only ahead of Cyprus, Lithuania, Latvia and Greece, while it lags far behind the best students, which in this case are Iceland, Switzerland and Norway. Longevity, unemployment and lack of quality savings are only three aspects that have placed Spain in the worst positions of the Global Retirement Index, which measures how countries meet the needs, goals and economic quality of retirement.
The most advisable thing is to plan the retirement savings at the beginning of working life, as soon as there is a saving capacity. The sooner you start saving, the better
"Almost a third of our existence we will spend retired," said from Banco Sabadell. Being able to have an adequate level of income when retirement arrives is, without a doubt, one of the priority objectives of the social welfare model, and there public pensions and their complementarity with private savings play a prominent role. "We have to become aware of the savings to encourage a positive change of mentality!", They say from the entity.
The first thing we must consider is to decide what level of life we want to reach when we retire and what saving effort we are willing to take to achieve it. And for this it is necessary information on the coverage of the public pension and the planning of private savings. Therefore, it is best to plan retirement savings at the beginning of working life, as soon as you have the ability to save. The longer life expectancy makes the retirement period longer and longer, so the sooner you start saving, the better.
What products to save on?
The debate about the future of public pensions has made the conviction that we will have to have additional savings to the public benefit more and more widespread. Pension plans are becoming more important in public awareness, even at a moderate pace. The favorable tax treatment of these products during the period of making contributions is one of the incentive elements that has been most used in the hiring of these products, making it one of the long-term savings products with greater tax advantages. Contributions to pension plans reduce the income tax base to a maximum of € 8,000 per year or 30% of the net income from work and economic activities.
As advice, before hiring a plan, we must be clear about the objective of benefits we want to achieve, as well as the connotations that come with your choice. Among these are aspects such as the availability of the investment, its tax treatment or the level of risk it is willing to assume, and therefore if moderate returns are sufficient, or if, on the contrary, the profile is more aggressive and willing to have a higher investment risk in order to achieve higher returns.
What returns do they offer?
At the individual level, the profitability of each plan is conditioned by its investment policy, and therefore it is convenient that it is truly adapted to the person's profile. In recent years, there has been a change in the risk profile of customers, having increased investment mainly in plans with a greater component of variable income such as mixed fixed income and mixed equity plans.
This change is mainly due to the reduced profitability of fixed-income assets, opting for mixed plans, with greater diversification of their investments, seeking more profitability in exchange for accepting some risk in a long-term horizon. In a scenario where interest rate hikes in the euro zone are not expected in the coming years – it is said that until 2023 -, the profitability alternative derives from exposure to equities.
The offer of Banco Sabadell
Banco Sabadell has always sought innovation and the best conditions in the design of its products. In terms of savings, the Bank has been a pioneer in creating plans linked to life cycles, that is, plans whose investment is automatically adapted as we approach retirement. This has been one of the latest trends in the sector, but Banco Sabadell has wanted to innovate even more within this modality, considering in the investment configuration not only the time horizon, but also the client's investment risk profile, determining three profiles for each approximate year of retirement. Banco Sabadell offers twelve future alternatives to its customers.
Thus, it has twelve plans configured from a combination of two variables: the estimated retirement date, with four time horizons (2030, 2035, 2040 and 2045), and the risk profile (aggressive, medium and conservative). In these plans, exposure to equities decreases as the estimated retirement date approaches, with positions in fixed income increasing, with different levels of equities and duration of fixed income, according to the aforementioned profile. Thus, Sabadell Planes Futuro, which is how these plans are known, has become the flagship product, also being used in employment plans with excellent results in terms of profitability.
Banco Sabadell offers life cycle pension plans that allow the investor to take advantage of the higher expected return on long-term equities
The time horizon of the investment, the long term, is the key, and in the short term, market volatility often creates sensations that make us lose sight of what the ultimate goal is. Therefore, Banco Sabadell offers life cycle pension plans that allow the investor to take advantage of the higher expected return on equities in the long term. In addition to the Sabadell Future Plans, the entity has other pension plans whose investment policy is focused on a defined risk profile, which extends from the most conservative plans with investment in fixed-income assets in the very short term to those plans with majority position in equities.
And this offer is also complemented by the insured pension plans (PPA), life savings insurance for retirement savings, with the same tax advantages as the pension plans, and with a guaranteed interest rate that allows the preservation of capital and ensure stability, for customers with a conservative investor profile.
In addition, Banco Sabadell offers one of the most competitive incentives in the market for attracting pension plans that, as they have observed, "can reach up to 5% depending on the time spent in Sabadell."
A reliable test: its excellent returns throughout 2019. "All our pension plans, so far this year, have had positive returns and we are very well placed with respect to the most relevant plans of our competitors," said Sabadell, highlighting the plans of the Life Cycle range, being "dynamic, with more equity component and accumulated returns of up to 23.72%."