Saturday, December 10

Private pensions are a ruin and a danger

These are not just some personal experiences that perhaps have come to our ears: that private pension funds are an economic ruin is evidence collected by all the data and studies available on the matter —an economic ruin for the client, of course, for the entity banking is a gold mine. For example, the last report published by a series of independent researchers who have been studying the subject for years reveals that the average profitability of the 408 Spanish pension funds with more than 15 years of history is less than half of the profitability offered by the Spanish State bond to the same term. In other words, if a person wants to have a supplement to his public pension when he retires, it is much better for him to invest his money in Spanish public debt than to invest it in private pension funds. And beware, because buying public bonds is considered the least profitable (and safest) financial investment of all that can be made.

This can easily be considered a scam because banking entities, taking advantage of their experience, professionalism and deep knowledge of the market, claim to offer a specific and very profitable service for which it is worth paying certain commissions on a regular basis. But the only certain thing is that in most cases it is much more profitable for each one, without any type of advice, to invest in public debt, which is the simplest and most basic financial asset of all and for which no money is needed. type of economic formation.

But beware, because the thing does not stop there: it is not only that with private pension funds you earn less money than with other less sophisticated and easier investment options, but you can even lose money! The aforementioned study reveals that there are 20 funds that had negative returns, that is, those who deposited a certain amount of money there now have less, instead of more. This is due, obviously, to the fact that the banks charge the client more commissions than the profitability that they manage to offer thanks to their financial operations. Calling it a scam is already an understatement, because in these cases it is no longer necessary to invest in public debt to make savings more profitable, rather it is enough to keep them under a mattress.

In any case, the low —or negative— profitability is not the only problem associated with these financial products. Turns out a recent research carried out by the organization Light House Reports points out that in Europe there are at least 15 private pension funds that speculate on food and energy products, which pushes their prices up, contributing to the current inflationary episode that we are suffering. For example, the largest Dutch pension fund, ABP, invests 30% of its portfolio in food commodities. In Spain, unfortunately, there is no transparent information to know exactly what the money from the pension funds is used for, but the investigation has discovered that at least the CaixaBank Destino 2026 fund, with more than 31,400 participants, invests part of its assets of 857 million euros in food. In other words, part of the profitability that these pension funds will grant to their clients when they retire will come indirectly from the higher price paid nationally and internationally for food and energy products, which in turn also contributes to raising their prices. . And it goes without saying that these products are also consumed by the owners of the pension funds, so the circle is closed: what is paid today for more expensive food and energy will be used to pay private pensions, and to have more expensive private pensions. generous in the future will have to pay more for basic products today; a huge nonsense that only serves for banks to enter a good pinch. It is a detestable practice both socially and economically that is still little known and that should be totally eradicated.

Finally, private pension funds have another problem: their profitability depends on the mood of the financial market, not on political or social considerations, especially if the banks that offer them resort to practices as risky and irresponsible as those recently used by many British entities , which have had to be rescued up to three times in less than three weeks during the crisis caused by the Liz Truss government’s mini-budget. This has been so because many of these British funds used part of their clients’ money in atypical and risky financial investments to achieve higher returns than usual. But the destabilization of the financial market last October caused them an urgent need for liquidity that would have caused their bankruptcy if it had not been for the intervention of the Central Bank of England (something recognized even by its own deputy governor Jon Cunliffe).

This is the umpteenth proof of how risky and dangerous it is to make your future pension depend on what the banks do with your money in the financial casino. The public pension system is much safer, because in this way the pension will never depend on the bets that the banks make in the financial market, but on the solidity and stability of a State, an institution that is not only a thousand times more solvent than the banks, but, for all its shortcomings, it is a thousand times more democratic.

In short, private pension funds represent a lucrative business for banks, but also economic ruin for most customers; they are of dubious morality in many cases, and certainly dangerous in others. Of course, they do not seem the best destination to make savings profitable.



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