The “living up to date”.” is something very “Spanish”. We are used to seeing that those who retire receive pensions similar to what they received while they were working. Today we will look at the causes that should lead us to save, always within our means.
Do you really believe that current pensions are sustainable?
Here are some data that reflect the Spain's difficulty in paying its pensions in comparison with other countries at world level. These statistics compare Spain with the OECD (an organisation of 35 countries, most of them better placed than Spain), and the source of these data is Pensions at a glance 2017:
These data reflect that:
- Spain spends an average of 3% of GDP (in the picture «GDP») more on pensions than it does on average.
- Incomes in Spain are below average (where it says «earnings»).
- Life expectancy in Spain is two years above the average (higher pension costs).
- The over-65s in Spain have more weight than the OECD average (more pension costs to bear).
If we add to all these data these two:
- The pension fund is running out of money, The world's largest and fastest-growing economy, consuming itself at a rate that in two years' time will be gone.
- Very important: the replacement rate in Spain is around 80%, while in the European Union it is 60%.. This compares the last salary against what we received with our first pension. Maybe now we understand why in Spain we spend 3'2% more of GDP on pensions... because we have a replacement rate that is too high to be able to pay for it.
It is clear that this kind of data is behind the talk of not being able to pay pensions.
The sooner you save, the more your money will increase exponentially.
This, which seems to make no sense, is called the «effect snowball”.”.
Let's say that, from your monthly savings of 200 euros, you dedicate 50 euros to your retirement, which means that in 1 year you have 600 euros for that purpose.
Those 600 euros generate a return in one year, let's say 25 euros. That €25 the following year will continue to yield a return, accumulating to the €600 you have already put in plus the €600 of that year...
A “compound interest”.” This will mean that you will get a much better return 30 years down the line than if you start saving at 57, when you only have 10 years to go before you retire.
The money in your current account is an annual financial loss.
As we have pointed out on several occasions, although it may seem strange:
if I save but leave the money in my current account, I will be losing purchasing power as long as there is inflation,I don't get a return on that money and everything goes up in price in the meantime.
Most years; there is inflation (in 2017: somewhat above 1%).
So if I left 1,000 euros a year in my account, I would lose 10 euros a year, assuming an average of 1% inflation (although in reality, many commodities rise above that figure). By contrast, by putting them into a savings product, I could get 30 euros a year, or even more. That is, a difference of 40 euros per year, according to the data in the example.
Be careful! We are not saying all this... this is something the Spanish already know. Thanks to the 5th Survey on Retirement and Saving Habits conducted by BBVA, we know that:
- 81% of respondents would recommend saving for retirement (and which they justify by the worrying state of Social Security).
- but only 27% of them do.
If you think it's time to do so, or that you should at least start looking at a savings product that will give you a good return, contact us and we'll help you find the right product for you. you will be able to compare more than ten financial institutions in one place, to make your search much easier. Find the best one now PIAS savings plan.
