A pension plan is a long-term savings product that consists of periodically depositing certain amounts with the objective of covering certain future contingencies. The contingencies can be due to survival, widowhood, existence, orphanhood or disability, and the most common, due to retirement.
Pension plans are generally totally voluntary (the state does not force us to contract them, but it could be the case that a banking entity urges their contracting as a requirement for granting a mortgage, for example) and usually have tax advantages such as in the income tax return, for example (reduction).
On the other hand, it should be mentioned that they do not replace in any case the payment of Social Security contributions, as they are different concepts, but they are complementary, that is, there is no problem in obtaining upon retirement the retirement benefit that we have been contributing through Social Security and also the pension that corresponds to us for the contributions we have made to our pension plan.
Subjects
Participant: are the people for whose benefit pension plans are created, whether or not they make contributions.
Beneficiary/ies: who are the people who benefit from the pension plan. They can be the participants themselves or other beneficiaries (such as heirs in case of death, for example).
Promoter: can be any collective (company, union…) that urges the creation of the pension plan or participates in its development.
Types
Depending on who constitutes the pension plan:
Individual Pension Plans: they are promoted by financial entities and the participant or holder of the Pension Plan can be any natural person. Contributions cannot be made by the promoter, only by the participant. It is the most common type of pension plans.
Employment Pension Plans: they are promoted by the company where the participant works. Contributions can be made by both the participant and the company or only the company, but never the participant alone. It is very common to find this figure as a benefit or salary supplement to employees.
Associated Employment Plans: they are promoted by associations, guilds, unions or other groups for their associates and members. In this case, as with individual pension plans, only participants can make contributions.
Depending on the stipulated obligations:
Defined contribution plan: are plans in which the contribution to be made to them is determined, but the amount of benefits is not known until the contingency occurs (retirement, death or disability). Individual pension plans, employment pension plans and associated employment plans are included.
Defined benefit plan: are plans in which the amount of the benefit to be received when the contingency occurs is known from the beginning. Employment pension plans and associated employment plans are included.
Mixed plan: are plans in which both of the above circumstances occur together. Employment pension plans and associated employment plans are included.
Depending on the patrimonial structure of the fund:
Short-term fixed income: The portfolio duration will be less than or equal to 2 years. Without variable income investments or derivatives, exclusively fixed income.
Long-term fixed income: The portfolio duration will be greater than 2 years. Without variable income investments or derivatives, exclusively fixed income.
Mixed fixed income: are plans that must have less than 30% of the portfolio invested in variable income assets.
Mixed variable income: are plans that have between 30% and 75% of the portfolio invested in variable income assets.
Variable income: are plans where more than 75% of the portfolio must be invested in variable income assets.
Guaranteed: are plans with an external guarantee granted by a third party that ensures a specific profitability.
We hope this information is very useful to you.