The sustainability of the welfare state He has been questioning for years. One of its pillars, the public retirement system, is in the eye of the hurricane. The aging of the population and the longer life expectancy encourage the more liberal economists to recommend to the citizens to save and allocate part of that remnant to the private pension plans. Beyond the ideological debate, is it a good idea? What are not accounts are stories, and the data is crystal clear: the vast majority of the 9.6 million Spaniards who have this product lose money in the last 12 months.
The pension plans of the individual system closed 2018, according to the data of the Association of Collective Investment Institutions (Inverco), with an average annual loss of 4.08%. For a period of three years, its annual yield was placed at 0.3% and rose to 1.81% and 3.33% for periods of five and ten years. In 15 and 20 years, their average annual return was 2.54% and 2.05%, that is, they barely cover inflation.
Ángel Martínez-Aldama, president of Inverco, says that it is not possible to qualify these results as good, bad or regular; "It depends on the profile of the investor and the chosen plan". From his point of view, 2018 was a year marked by the strong volatility of the markets. "In 2017, the one-year yields of the plans were on average 2.77%," he recalls.
The industry is very concentrated and the supply between entities "is not competitive"
In his last study on Profitability of pension funds in Spain. 2003-2018, the professors of the IESE, Pablo Fernández and Juan Fernández Acín, do not have, however, hesitation in questioning the goodness of the data as a whole. "In this period, the profitability of the Ibex 35 was 118% (annual average, 5.33%), and that of the 15-year government bonds, 95% (annual average, 4.55%). However, the average profitability of pension funds was 38.7% (annual average, 2.11%), these researchers recall. "Among the 385 pension funds with 15 years of history, only six outperformed the Ibex 35 and 12 the 15-year government bonds. On the other hand, four funds had a negative return ", they explain.
Among the products that are saved from burning in this period are Bestinver Mixed Plan and Orange S & P 500, which obtained an annual yield of 7.07% and 7.01%, respectively. For Gustavo Trillo, commercial director of Bestinver, the only way to obtain good profitability is to "adapt the investment to the term, which must be at least five years". It's about finding, according to Trillo, cheap companies in which to invest and put the time in your favor. "We are unbelievers of risk profiles so fashionable these days; Sometimes they cause investors to direct their investment in the short term and are excessively conservative. Effectively, volatility is saved but low returns are collected. It is the price that is paid ", advises the Bestinver manager.
What happens with pension plans in other countries? It is true that on many occasions, in the international arena, the pension plans that are compared are not homogeneous. However, the data again speak clearly and do not leave Spanish industry very well. The Organization for Economic Cooperation and Development (OECD) publishes annually a report on pension plans in which it compares the yields of these financial products by countries. According to their data, in 2015, the profitability of Spanish pension funds was 1% compared to an average of 2.8% (calculated on 28 countries) and of 7.8% of Denmark, 7.2% of Holland or 4.9% from Sweden. In the following years the story was repeated. In 2016, Spanish pension funds earned 2% (average of the group, 2.1%) and in 2017 (last available comparison) they were revalued by 1.5% compared to 14.6% of Polish funds, the 7 , 3% of Australians or 6.7% of Greeks.
The sector has emphasized the fiscal hook, incompatible with a long-term vision
Finizens, asset manager specializing in passive investment, says in its latest study on pension plans in October 2018 that, in terms of average profitability, Spain is in the worst position (2.70%), behind France (5 , 02%), Italy (3.02%), Germany (4.04%) and Holland (5.29%), having a "significantly lower" historical profitability. Giorgio Semenzato, CEO of that entity, believes that "the poor profitability" of pension plans in Spain is due to "the high fees they apply". And it gives more reasons: "It is a market concentrated in few managers, practically an oligopoly, with a very low level of competition. All this leads to significant inefficiencies and a non-competitive offer ".
The pension plans basically have two explicit commissions (in addition to the possible subscription or reimbursement): the deposit, which for a year is established by the legislation in 0.20%, and the management, which, on average , stands at 1.25%. Current regulations establish that the management fee is determined by the type of product. If it is fixed income, the maximum is 0.85%; if it is of mixed income, of 1.30%, and if it is of variable income, of 1.50%.
According to Finizens data, there is 32.86% of pension plans that still charge the maximum commission. "The result is that the average commission in Spain (1.18%) is slightly lower compared to France (1.27%) and Italy (1.29%), although it is still high if we measure it with Germany (0) , 75%) and the Netherlands (0.39%) ". In addition, Semenzato reminds that not only do you have to take into account these explicit commissions, but also those that enter the managers of active management pension plans, when buying and selling securities. "We believe that these expenses weigh down the returns and hence we defend passive management [básicamente se dedica a replicar índices], more diversified, better protected against risk, more efficient and cheaper ".
Professors Pablo Fernández and Juan Fernández Acín abound in this idea, stating that "it would be interesting" for the funds to provide the profitability data they would have obtained if they had not moved the portfolio: "So we would know exactly what value it contributed (rather, in most cases, it excluded active management ".
Spain is in the OECD caboose in terms of the profit of these products
According to the latest data from Inverco, private pension plans in Spain manage more than 72,200 million euros in the individual system, amounting to 107,000 million if the employment plans and those of the associated system are added. CaixaBank, BBVA, Santander, Bankia and Mapfre account for 66.2% of this net worth. Gustavo Trillo insists on the idea that we are facing a sector "very bancarizado". "The highest returns are almost always found outside the funds with the highest net worth and the highest number of subscribers," he stresses. For his part, Semenzato believes that in Spain "the plans have been imposed on their subscribers, which explains that 66% of them have only made a contribution in their lives. In addition, emphasis has been placed on the tax sale argument, which does not make sense in the long term. " IESE experts insist that, "in several cases," investors in pension funds lost the tax allowance that the State gave them to induce them to invest in those funds in less than five years (consequence of commissions and inefficiencies in investment and Management).