The decision to save for our future retirement is an obligation that is becoming less and less avoidable. We have been hearing growing doubts about the sustainability of our public pension system for many years. Like almost everything in life, it is important to put a certain distance when analyzing topics and keep in mind that any opinion that may be expressed has an obvious bias depending on the position occupied by the person giving the opinion.
In the case of pensions, I would like not to be alarmist. I don’t think it’s about sending apocalyptic messages or making citizens think that suddenly public pensions are going to disappear because that’s not going to happen. What is an obligation is to be aware of the increasing effort that paying them will entail. It’s not ideology, it’s demographics. Let’s go ahead with some data to illustrate the topic we are talking about.
According to the INE in Spain in 2002 there were just under 7 million people over 65 years of age. Today we are close to 10 million, which represents 20% of the Spanish population. But the really relevant data is the one estimated for 2055, when 30.5% of the population will be over 65 years old. We are talking about 10 more points, almost one in every 3 people. The figure is eloquent in itself, in addition to being closely related to a growing life expectancy, undoubtedly the best news, but with an undeniable impact on public accounts. As an addition to this reality, we must add the impact that this greater life expectancy has had on public benefits. In a few decades we have gone from retirees who enjoyed their public pension for just over 10 years to seeing how, on average, that period remains, if not exceeds, 20 years.
At this point and based on the solidity of projections that, let’s be honest, have little margin for error, I believe it is more necessary than ever to value private savings. The complementarity of public benefits is going to be a more pressing need every day and, as a society, we must take steps to not let very valuable time pass by. We need to strengthen the financial culture of citizens and make us all aware that no one is going to look after our future like we can do ourselves.
In the field of pension plans, the star instrument for channeling final savings, positive steps have been taken and others not so much. The promotion of the second pillar to ensure that companies are involved in promoting employee savings is a good initiative. Employment pension plans are a necessity if we want our pension system to be on par with European paradigms when we talk about robustness and sustainability. The same cannot be said of the decision that in recent years has reduced contributions to individual plans to 1,500 euros per year, clearly insufficient to constitute a truly complementary plan to the loss of purchasing power that for many professionals reaching the retirement.
And when we talk about planning our future, at PSN we are clear that achieving it involves following three rules. The first is to do it as soon as possible, because having long time horizons allows us to define more effective strategies. The second requires systematizing our savings. There are many small savers who combine periods of significant savings with phases in which they completely forget the objective. In the field of long-term savings, the smartest thing is to always be systematic. And finally, once it has been decided that building an economic future is not an option, it is a necessity, it is important to know with whom you want to do it.
At PSN we have been managing the assets of thousands of professionals for more than 90 years and we have managed to ensure that our pension plans are consistently among the top positions in the main profitability rankings. We believe in solid management that allows us to have stable returns in the long term. This is how we have achieved that our main plans obtain returns up to 15% better than the average of their category over 5-year horizons. And that is where we must focus, on making our investment more profitable in the long term and not on allowing ourselves to be seduced by specific offers that contribute little to the real objective. There are many citizens who are blinded by seeing extra bonuses for the transfer of their plans, without paying attention to what is really important, which is the profitability trajectory that the manager can provide.
In conclusion, let’s avoid exaggerated alarmism, but let’s not resort to the ostrich technique either. Information, reflection and decision are the ingredients that will allow us to take the right path and, let us not doubt, saving for the future always is.