Employment pension plans (EPPs) promoted by companies or institutions are showing historical highs in terms of assets, “mainly due to the remarkable returns they generate,” 11.2% year on year, recalls José Luis Manrique, director of the study at the Invercauld Observatory. Other reasons include rising contributions: 300 million more in the first nine months compared to the same period the previous year.
Also behind this positive behavior is the emergence of simplified employment pension schemes (PPES), developed by the Ministry of Labor with the aim of pooling company savings and, above all, improving coverage of the self-employed and SME workers.
Currently, there are already 41 simplified plans for the self-employed and one sectoral plan – a construction plan. The latter, as Robert Roig, business director of VidaCaixa, the organization responsible for its implementation, explains, “has brought together more than 60,000 promoters and more than 580,000 participants in just six months.”
As for the PPES for the self-employed, according to Manrique, they accumulate 129 million euros and more than 34,000 participants. “And we expect it to grow much more because there are still a lot of self-employed workers who don’t know about this savings option,” says Eva Valero, director of savings and retirement at Caser Saving and Investment Solutions.
In particular, the latest Kaser Observatory study in this regard confirms that while more than a quarter of those surveyed (26%) admit to having heard of PPE or PPE, 36% of them admit to not knowing their characteristics in detail.
“While things can always be improved, the current incentives in this type of plan are very attractive, so it is only a matter of time before more awareness is spread about it and more participants are enrolled,” says Alejandro Martin Toledo, fund manager and partner. of Horos AM, noting that this type of product was launched less than two years ago, so they need “a certain path in the market to become more known,” he notes.
The truth is that Law 12/2022 on the promotion of work pension plans, valid for two years, was a turning point in the development of these instruments. According to José Miguel García Muñoz, commercial director of employment plans and institutions at Ibercaja, “the goal is that they can be extended to a large part of the population. To this end, important innovations have been introduced, such as new types of products, easier access to employment plans, social security and tax benefits for both the company and employees, as well as for the self-employed.
“Implementation of the new simplified plans is limited to collective bargaining, which is usually complex and time-consuming. We believe they will achieve their goal over the medium term because they represent an excellent last-ditch savings option for retirement, and because sectoral negotiations are raising demand for greater financial security in the labor market.” Roig, business director of VidaCaixa.
In terms of returns, in general, those PEs whose portfolios follow a moderate to risky investment strategy are “achieving the goal of outperforming the CPI over the long term, as global equity markets have performed very positively over the past two years,” Eduardo points out. Denise, Director of Institutional Business at BBVA Asset Management.
For those whose funds follow a more conservative strategy, “it is more difficult for them to take on this task, especially given the difficulty of investing in fixed income assets in recent years as a consequence of rising interest rates,” admits Denise.
Taxes
. The taxability of employment plans is one of their main attractions, both for the employee, who can deduct the contributions they make from an impossible basis, and for the company. This amount is deducted as an expense from contributions to the employee. In addition, with some restrictions, “10% is deducted from the full corporate tax rate, and social security payments are reduced due to common unforeseen circumstances,” summarizes Mapfre España.By product. According to Mercer’s defined contribution plan market study released in June of this year, pension plans continue to have strong relevance, accounting for 65% of the market, “although we have seen a trend toward retirement adoption in the last three to four years.” insurance with life cycle strategies, where, depending on age, the participant is more or less risk averse. However, we are not seeing much acceptance of corporate social security plans, mainly due to the mandatory interest guarantee, which reduces expectations of future profitability,” comments Miguel Angel Menendez, director of social security and pensions at Mercer Spain. .
Flexibility. José González, director of pensions and collective security at Santander Asset Management Spain, believes that pension policies through flexible remuneration have also become relevant “as companies seek to encourage savings and financial responsibility in their employees, and this type of “product offers an attractive alternative because the employee can convert part of the gross salary into tax-exempt output, which increases the employee’s net profit,” he argues.
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