Increasing savings in employment pension plans is one of the objectives that the Minister of Social Security, José Luis Escrivá, set out to achieve when he took office, and for this he finalizes the design of a company pension macro-fund that, in the opinion of of the experts, it could improve corporate social security in Spain, but it has defects that will reduce its effectiveness.
To remedy these tasks, analysts advise Escrivá to replicate the Automatic Enrollment (AE), a corporate social welfare system implemented in the United Kingdom in 2012 that has obtained very good results.
“This model has been highly successful and has made it possible to increase long-term savings for workers’ retirement. This makes it a good solution for promoting the second pillar of complementary social security in Spain and strengthening the public pension system” , argue Elizabeth Casares, general secretary of the Organization of Pension Consultants (Ocopen).
The British system alleviates two of the main defects of the Spanish macrofund: its voluntary affiliation and the absence of tax incentives for companies that implement employment plans.
The AE is assigned by default to the worker, who can waive it, and is mandatory for employers.
These must automatically enroll all their employees who meet minimum requirements in a company pension plan and make mandatory contributions in their favor of 3 percent of salary. In turn, workers must contribute 4 percent and the State 1 percent through tax deductions on contributions.
Although employees can opt out of employment plans, they hardly do. According to data from the Unespa insurance employer, since its application more than 10.2 million workers have been automatically enrolled in the system, of which 91 percent have remained in it.
To be part of an employment plan you must be over 22 years old, not be close to retirement and earn at least 10,000 pounds per year.
Another quality of the British model that the Spanish model should adopt is to offer tax incentives to companies that adopt pension plans for their workers.
so esteem Angel Martinez-Aldama, president of Inverco: “It should include strong fiscal incentives for these companies, since otherwise it would make it difficult to meet their objectives of giving stability to the current complementary social security model and promoting company pension plans supported in the framework of collective bargaining , facilitating access to them for SME workers and the self-employed”.
An increasingly necessary boost in Spain if one takes into account that only one percent of companies have a pension plan and that only one in six workers has this type of savings.
This makes the assets in employment plans around 36,200 million euros, far from the 87,587 million that house individual pension plans, according to the Association of Collective Investment Institutions and Pension Funds (Inverco).
Analysts see the implementation of Automatic Enrollment in Spain as feasible if the parties involved reach an agreement: the Executive and the social agents.
“The Spanish government should adopt the British model, mainly the measures that have worked best, such as automatic enrollment in the employment plan, that the participant contributes an amount equal to or greater than that of the employer, and that there is an important tax incentive for both”, points out Enrique Devesa, professor at the University of Valencia and IVIE researcher.
To apply it in Spain, it would be necessary, in his opinion, “political will”. The same that Isabel Casares demands: “a clear approach should be established by the Government to reach an agreement with companies, especially SMEs, and unions so that the British model is implemented as a complementary system to our public pension system and never as a substitution.
He also considers that a consensus is necessary on how to compensate companies for the increase in costs and the effort they make to implement this system.
A possible brake
Miguel Angel Menendez, director of the social security area of Mercer Spain, sees difficulties in the adoption of the AE, despite the fact that he considers it an “excellent solution”.
The problem stems from the fact that Spanish legislation “prevents forcing companies to implement retirement plans for their employees”, but he believes that this obstacle can be avoided “by considering its implementation through collective bargaining”.