Until now, companies had a margin of two years to incorporate new employees into the company’s pension plan. However, from now on this incorporation will have to be practically immediate, within a single month of being hired on the payroll. This is set out in the recent Royal Decree 668/2023, of 18 July, which modifies the Regulation of pension plans and funds, approved by Royal Decree 304/2004, of 20 February, to promote employment pension plans.
This Royal Decree completes the regulatory development of the Law on Employment Pension Plans and promises to speed up the incorporation of workers into retirement savings vehicles. The measure, which affects large companies and SMEs alike, is designed for both existing occupational pension plans and new publicly promoted pension funds. The latter is the figure through which it is intended to promote pension savings in the company sphere.
Private pension plans are in short supply in Spain
Savings in private pension plans in Spain are very small, especially compared to the volume saved in bank deposits.
If we look at the data for the end of the first quarter provided by the Association of Collective Investment Institutions and Pension Funds Inverco, we see that the vast majority corresponds to individual plans promoted by financial institutions (82,553 million euros and 7.35 million participants). Far behind are employment plans (35,200 million euros and 1.90 million participants), a type of private pension plan promoted mainly by large companies and the public administration.
Publicly promoted occupational pension funds
With the aim of boosting pension savings in companies, also in smaller companies, the publicly promoted occupational pension funds (FPEPP) have been created and will probably be implemented this autumn. These are their main characteristics:
- Their fees will be lower than those of individual plans, between 0.1% and 0.25% per annum.
- 500 million in these funds in three years, so they will have a volume that will allow them to access more sophisticated investment assets.
- Contributions may continue to be made in the case of partial retirement.
- Savers will be able to benefit from contributions made by companies through commercial programmes or sponsorship campaigns.
- Existing occupational pension schemes and simplified pension schemes can be subscribed to these new publicly promoted occupational pension funds.
- They will be managed through a digital platform that will make all the information available to promoters and workers.
How will its implementation work?
A few weeks ago, the Ministry of Inclusion, Social Security and Migration proposed awarding the management contract for these new publicly promoted occupational pension funds to five entities: VidaCaixa (CaixaBank), Gestión de Previsión y Pensiones (BBVA), Caser Pensiones, Santander Pensiones and Ibercaja Pensión.
Each of them will manage three FPEPPs with different risk profiles: one more conservative, one mixed and one riskier. It is these managers who decide which assets to buy for each investment vehicle. In total there will be 15 different options to choose from.
In short, these publicly promoted occupational pension funds aspire to consolidate themselves as an instrument of complementary social provision, giving a boost to social provision in the company.