Saving for the future
The convenience of this type of financial product is clear, in that the low birth rate, higher life span and the serious doubts over the state of the social security system in a couple of decades time, all point to the need to save for the future as a means of complementing the state pension. What's more, these financial products enjoy highly favourable fiscal advantages. Previous incentives have ensured that complementary social security - via pension plans or life insurance - has grown from 7.7% of the Spanish GDP in 1990 to 13.1% in 2001. However, in Sweden or the UK, the equivalent rates are 114% and 194% respectively.

Nowadays, in these times of economic uncertainty, few can deny feeling nervous about the weekly falls in pension plan funds as a result of stock market crashes. Little by little, the profitability of future pensions is being affected by the stock market crisis. Faced with such a situation, the most conservative analysts advise their clients to move their savings to fixed rate funds, at least until the current situation improves. On the other hand, some experts advise pension plan participants to invest in the market because stocks are far cheaper now than a few months or even years ago. Once in possession of a good shares portfolio, the investor can take full advantage of the predicted market rise.

Between these two proposals are the analysts who suggest taking up mixed pension schemes that combine the two types of interest rates.

Time of crisis
During the first eight months of 2002, the profitability of pension plans drew a complete blank. The instability of the stock market has driven it to a level comparable to that of eight years ago, during the crisis of the fixed rate products. Nevertheless the total pension scheme funds of Spaniards reached 43,185 million euros, as of 30th June this year. The number of pension scheme holders hovered around the six million mark, 5,978,715 to be precise. Also, companies owe their employees around 4,360 million euros in company pension plans.

The trade unions spent a good part of 2002 demanding further rights for workers' representatives (whose function is similar to that of a company's administrative council) to control company pension plans. Up until 1st January this year, the workers' representatives enjoyed a majority in these organisations. But the recent Budget Complementary Law modified this situation to establish parity between trade union and company spokespeople.

The statistics concerning the performance of pension plans during the first seven months of 2002, show that fixed rate schemes have been strengthened by the current instability of the markets. Hence, even though the best performing variable rate pension plans only lost 1% during this time, the best performing fixed rate pension plans increased 3% during the equivalent period.