A few weeks ago, we read a very interesting article in the newspaper El País, which showed the high commissions charged in pension plans to their participants, and how the recent regulatory changes had affected them. We would like to summarize some points as it was a rather long and complex article.
2015 Tax Reform
The truth is that, at the end of 2014, reforms were made limiting the maximum admissible commissions in pension funds (which came into force in 2015). Why was this done? Because they were considered abusive, while at the same time reducing the profitability of these products, which also limits the growth of potential savers.
How was the reform?
- The commission that could be charged by the managing entities (who decide how the money of the participants is invested), went down from 2% to a maximum of 1.5% (2018 review: they have gone down even further, to 0.85-1.5% depending on the type of plan).
- Pension fund custodians, also saw their fees reduced from 0.5% to 0.25% maximum (2018 review: they have dropped to 0.2%).
However, as experts in the field say, instead of interpreting the reform as a sign that things were not being done well, the only thing the institutions have done is to stick to those maximums. One fact is lapidary: the 10 pension plans in Spain with the most participants charge the maximum commissions.
Reform objectives
What is sought from public bodies is real competition between entities, in the same way that happens with investment funds, so that it causes:
- Greater transparency
- Reduction of commissions
- Improved performance of pension plan returns
All these comments are related to the current difficulty in improving the situation of Social Security, which ultimately determines the payment of pensions. And the fact is that the lack of promotion of private savings in Spain means that we are used to relying on the welfare state and having a high pension, but the outlook is not the best.
In this regard, the figures are clear: private pension funds have just over 100 billion euros, which translates into less than 9,000 euros per account. This is one third of the average in the European Union in relation to GDP.
If you want to improve your retirement pension with pension plans that really make your investment profitable, call us or write to us, and our Savings and Investment Department will help you choose one.
