Occupational pension plans (PPE) are one of the products designed for finalist savings most recommended by experts as a complement to the retirement pension.
Until now, they have not had a great introduction in Spain , mainly because more than 99% of the Spanish business fabric is made up of SMEs, most of which do not have enough capital to promote an employment pension plan that covers contingencies of your employees.
Only 12,000 companies are covered by this system in Spain , which has 1,966,188 participants, of which 800,000 are civil servants. In addition, its assets are around 34,462 million euros, very far from the 77,462 million volume of assets accumulated by private pension plans.
Despite their low acceptance, “pension plans are one of the most suitable and competitive options for saving for retirement,” says Rafael Villanueva, manager, retirement of Willis Towers Watson Spain.
What does it consist on?
They are social security systems complementary to the public retirement pension that, in addition to retirement, cover disability and death, and are promoted by a company or by a public institution for the benefit of its employees.
The company and the employees make contributions during the worker’s working life and rights are accumulated that the participant can redeem at the time of his retirement or if special cases occur. These contributions have a maximum annual limit that currently amounts to 8,000 euros.
Limit that applies jointly to the contributions made by the company and the employee. In the case of shareholders with disabilities, the cap amounts to 24,250 euros per year. It should also be borne in mind that adherence by workers is voluntary and, once the plan is established, employees can join it at any time as long as they meet certain requirements, such as having a minimum seniority of two years.
Occupational pension plans have a number of attributes that individual pension plans lack. Among them, lower commissions, which improves your profitability. At lower costs, higher returns. Management and deposit fees for PPEs range between 0.3% and 0.5% of assets, while those for individuals are one of the highest in Europe, they can reach 1.7%, the maximum allowed by the law.
Another of its advantages is its Control Commission formed by representatives of the company and workers , in charge of supervising the operation and execution of the plan. “The Control Commission provides security for the investments made by the pension fund”, according to Isabel Casares, general secretary of the Organization of Pension Consultants (OCOPEN).
In addition, its tax incentives are becoming more attractive. At the moment, the contributions to the employment pension plans with the right to deduction in personal income tax are 8,000 euros , but the Government plans to raise them next year to 10,000 euros. “This allows participants to generate additional savings that they should reinvest in the plan,” says Rafael Villanueva .
Employment plans are also favored by the ‘matching contribution’ formula, through which the company makes contributions in favor of the employee as long as he or she makes a minimum contribution, in order to promote savings.
Despite their differences or perhaps because of them, individual and occupational pension plans are fully compatible and experts recommend future retirees to opt for both. “The two modalities can not only be combined but also help to diversify the investment strategy”, indicates Miguel Ángel Menéndez, director of the social welfare area of Mercer Spain.