The pressure on the viability of pensions is increasing due to the consequences derived from the Covid-19 crisis, which forces an increase in spending on public aid. This is one of the alerts that emerges from the latest report “Pensions outlook 2020” of the Organization for Economic Cooperation and Development (OECD). “Expanded coverage of job retention schemes and unemployment benefits have reduced the transmission of the labor market decline to public pension rights, but recently accumulated debt will add pressure on pension finances, already strained by demographic changes “, indicates the study.
Under this scenario of uncertainty about the pension system, the institution encourages governments to ensure “That people continue saving for retirement”. In other words, do not neglect and even encourage private pension plans. All this in view of the fact that the public system supports more and more stakes derived from demography and the economic crisis.
Coupled with this, the OECD calls on member countries to convey to their citizens that it is not a good decision to sell their assets in the face of retirement at a time when the market fluctuates. «The answer to the decrease in the value of assets in portfolios is to maintain the item and avoid materializing losses in value through sale. Saving for retirement is long-term, ”says the organization. And he adds: ‘Experience shows that selling when markets fall and buying when they rise is far from appropriate as’ timing the market’ (that is, trying to predict future market movements) is very complex and subject to great risks. Sell assets when they occur “shocks” it can lead to reductions in value and excludes opportunities to recoup those losses. ‘
This recommendation to promote private plans clashes squarely with the Government in the case of Spain. The Coalition Executive of PSOE and United We Can greatly limit tax incentives for saving for retirement at the individual level. The measure is included in the State’s general budgets of 2021 and plans to reduce the annual deduction in personal income tax from 8,000 to 2,000 euros in individual private plans; on the other hand, the deduction would increase by 2,000 euros for collective business plans.
The OECD also makes a general recommendation that citizens not take out their retirement savings early. See, rescue the private plan out of time. This should be reserved as a ‘measure of last resort based on individual exceptions’. In other words, the institution seeks to discourage early access to pension plans.
Protection against storms
Likewise, the institution focuses on “non-habitual workers”, that is, temporary workers and the self-employed, for example, in the sense that the regulatory framework must be “aligned with the basic principles of the OECD for the regulation of private pensions by guaranteeing non-discriminatory access to retirement savings plans, minimizing consolidation periods and facilitating the portability of pension rights and assets ”when changing companies.
“Options include requesting the same enrollment rules for permanent full-time employees; facilitate access to retirement savings plans in the workplace; and offer targeted retirement savings products, ”the report adds. The objective sought is that, once retirement has been reached, the conditions in which all workers reach retirement are more or less comparableTaking into account, for example, that temporary employees or the self-employed traditionally reach the elderly with lower pensions.