Contracting a pension plan has a clear objective: to enjoy a calm and uneventful retirement, complementing the public pension. Experts agree that you should start saving for retirement as soon as possible. But, what to take into account when contracting a pension plan? Which one to choose according to my profile?
Esther Pichardo, Director of Savings and Pensions at BanSabadell Vida y Pensiones, explains that, when opening a pension plan, “you should always invest according to the risk profile and the time horizon for that investment, that is, , depending on the time remaining for retirement from working life”.
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Pension plans are long-term financial products to which regular contributions are made, which are then invested in the market. Depending on the investment policy of the pension fund, its managers adjust the investments in fixed or variable income. Therefore, as Pichardo advises, "you have to choose the plan that best suits the investment preferences of each person and, in addition, it is advisable to seek advice from experts to choose the best way."
In this sense, the Director of Savings and Pensions at BanSabadell Vida y Pensiones points out that "pension plans have a wide range in terms of investments: from the most aggressive, with 100% in equities, to the most conservative or even guaranteed as the Assured Pension Plans (PPA). And going through any variety of mixes, with different percentages of combination of different assets”.
These financial products have a broad time horizon, specifically, throughout the entire working life. For this reason, "they cannot have a static investment policy throughout the life of the product." And this is where life cycle pension plans come into play, which adapt the investment of the plan to the client's age at the time of contracting, and are also automatically adjusted each year, "reducing the weight of variable income and the duration of the fixed income, so that, as the time to collect the plan approaches, the product becomes more conservative”, adds Pichardo.
In other words, this type of plan "in addition to adapting to the risk profile, is also adjusted to the vital moment in which each client is: further away from retirement or closer", comments this expert.
Complementing the public retirement pension with a pension plan, in addition to being an investment for the future and the flexibility it provides, offers certain tax advantages. From January 1 of this year, a saver can contribute a maximum of 1,500 euros a year to his private pension plan with the right to deduct in the Income statement. This amount is set for all the individual contributions made to pension plans.
Before this legal modification, the maximum threshold was 2,000 euros during the year 2021, and prior to this date, at 8,000 euros per year. In the case of company plans, they accept individual contributions from the participant and business contributions, and allow individual contributions to exceed 1,500 euros, for an amount equal to or less than those made by the company to the participant. In any case, "the joint legal maximum for individual and company contributions is 10,000 euros per year for each participant," explains Pichardo.
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