As we have been explaining in our blog, the Social Security of our country is not living its best moments. The continuous withdrawals needed from the Reserve Fund to pay pensions are worrying because of its near depletion, and new proposals and alternatives to improve the future pensions of our retirees are beginning to be put forward. We will discuss the key role that companies will play in this new dynamic.
What is Supplemental Welfare?
Complementary Social Welfare (hereinafter referred to as P.S.C.), as its name suggests, is intended to help improve the benefits (i.e., among others, pensions) already provided by Social Security.
Traditionally, these public pensions and subsidies have been sufficient, thanks to a replacement rate (comparison of the first retirement pension with the last salary) above 70-75%, as well as a sustainable “pension fund”.
However, as we said in the heading, we will see more and more how our “protectionist” Welfare State of the citizen is getting closer to other European cultures, in which upper-middle class citizens will have to supplement their pensions in order to maintain a standard of living similar to the one they lived when they were active.
Options for improving Social Security benefits
This is where the PSC comes in, which can be given from two ways:
- Individual way: I, as a citizen, take out a pension plan or other savings product, with the idea of generating a final savings that, at the end of my working life, will have generated a substantial return, which I can recover to have a “golden retirement”.
- Corporate way: I, as an employee, have the good fortune to work in a company that pays me, in addition to my salary, with:
- a collective savings product, which I will be able to draw on when I retire.
- health insurance, life insurance, accident insurance…
There are several ways to do this. Flexible remuneration is an example that will allow workers to enjoy services and products that are paid for by their company, but then deducted from the employee’s paycheck, allowing these amounts to be deducted from the worker’s income tax. It is a way of increasing the net salary without costing the company more.
If you want to know what options exist in companies to improve their Social Foresight or, also known as Social Responsibility, we can help you. At PIB Group Iberia we have many clients who have already implemented it.
