Despite the fact that pension plans are the most popular products to have a peaceful retirement, there are some myths, preconceived ideas, about how they work that do not adjust to reality. With the help of BBVA we review these not entirely true ideas.
1. Are pension plans for the rich? Do you have to save a lot of money to open one?
Not at the beginning. It is a very flexible product and the contributions can be periodic or punctual. The amount depends on the type of plan that we have contracted, but the amounts are around 30 euros per month or its annual equivalent, something that allows us to save little by little if we are constant.
2. Do pension plans always invest in risky assets?
Again you don’t have to. Indeed, there are pension plans that invest in risky assets in search of higher returns but there are also plans that, at the opposite extreme, do not invest in risk assets, but in debt or liquidity securities, adjusting to conservative profiles that do not put at risk your savings. In addition, there are mixed pension plans, so that any saver, regardless of their risk profile, can find one that suits their needs.
3. Is it true that the money invested in a pension plan is lost if the owner dies?
Absolutely not. That heritage that is not lost, but is transmitted to beneficiaries that the participant can freely establish. The pension plans contemplate this contingency and in the event of the death of the holder, the consolidated rights (patrimony) of the same fall on the beneficiaries designated by the holder. What if they haven’t been appointed? In that case, as long as it is so established in the specifications of the plan, the descendants, widowers or executors of the plan may be beneficiaries.
4. Are pension plans not profitable?
Well not exactly. Pension plans are savings vehicles that, except for the guaranteed ones that establish a return formula that the participant knows from the beginning, do not offer a return agreed in advance. But this does not mean that they do not offer profitability, although it is convenient to know what type of plan we should be in at each stage of our lives and what we can expect from each of them.
If we want to aspire to greater profitability, we must inevitably assume greater risk and in the long term. On the contrary, savers with little time margin should focus on consolidating their savings, so they should not take risks and therefore they should settle for lower returns.
5. What about the taxation of pension plans?
There are people who claim that by rescuing him, the State keeps all his money. In effect, pension plans have a fiscal impact when redeeming them. The benefits of the same are considered income from work and must be taxed for it. But on the other hand, let’s not forget that they also have significant tax breaks on the contribution, which allow us to reduce the tax bill every year.
6. Do we have to be financial experts to invest in a pension plan?
Although there is a lot of information about these products available to anyone, it is recommended to go to the bank or financial advisor in case of doubt.
7. What is a pension plan for?
Retirement is a new stage that has consequences for everyone. One of them is the reduction of income compared to our stage as active workers. Therefore, the pension plan is a really important savings to be able to have a comfortable retirement and in accordance with our expectations.
8. If the bank goes bankrupt, will I lose my pension plan?
BBVA reminds that the bank (or its manager) is the entity in charge of managing the assets of the pension fund on which the plan is instrumentalized. However, this heritage is guarded by an independent entity, which is the depositary entity. This and the managing entity have the mission of supervising each other.
9. Who monitors the pension plans?
The pension plans are subject to the supervision of the General Directorate of Insurance and Pension Funds, dependent on the Ministry of Economy, and which implements strict controls on the management of assets and on the operation of these products. Savers also have the figure of the Participant Ombudsman, who will deal with the claims made by the participants and beneficiaries to the Managing Entity or Depository, or to the Entity Promoter of the Pension Plans.
10. Can I redeem my pension plan? When?
The pension plans, from January 1, 2015, allow redemptions of those shares that are at least 10 years old, counting from that date. Therefore, the first redemptions under this assumption of liquidity may be carried out as of January 1, 2025.
The other redemption scenarios are: retirement, disability, death of the holder, a situation of severe dependency or great dependency, long-term unemployment or serious illness.