“We cannot apply 40-year-old approaches to pensions.”

-Why don’t Spaniards think much about medium and long-term saving for retirement?

-First, I would like to escape any kind of apocalyptic vision of public pensions. What is certain is that they will be under increasing pressure, and we are trying to help them understand that this is a matter of numbers. But we have absolute confidence in the public benefits system, and it will be there. Regarding your question, there are three reasons that explain this lack of a saving mindset in the medium and long term, which is called ultimate. There is no cultural issue with saving, we are what we are, not northern or central Europe; We have another way of understanding life. Then there is the issue of lack of financial education and we, as an industry, have an obligation to help with that. Then there is a third issue that the public and private sectors must work on together: the fact that we need tools that encourage saving. Currently there is a situation where the incentive to save in the medium and long term is not sufficient. We realize in the industry and at Mapfre that there are not enough incentives to encourage such necessary savings in society.

-When do you think this social problem of lack of savings began to appear?

– It is ingrained in our society. In Spain, we have absolute and justified confidence in the public pension system. We have a deeply rooted culture of the welfare state where we believe we will always have that coverage or that guaranteed status. This is what has changed. Therefore, we have to understand that the state has a very relevant function, that we actively contribute to the public good, but we cannot deposit everything into what the state can face because there are a series of circumstances from the demographic point of view, from the economic and social point of view, etc., that have changed the entire scenario. What we cannot do is continue to apply methods that existed 30 or 40 years ago to a situation that is very different from what we have now. All you have to do is look at the population pyramid, and you’ll realize that something very big has changed. So this is what we should be able to understand and in a different scenario we should manage it differently. We always advocate for public goods, but we realize that someone else has to be there, that someone has to be there to supplement what the state will not be able to do. I read the EU Finance Commissioner saying that if we cannot encourage the private sector, this will create a feeling of vulnerability, which is an important word for younger generations. Our children must understand that they must build their savings themselves (individual retirement plans) and that the company can help them with the second pillar (company plans).

-It is clear that the public pension will not disappear.

-We have a duty to analyze this very calmly, evaluate it, and leave aside ideologies to understand that it is a purely numerical issue. Currently, public benefits, of more than 13,000 million euros represented by the public pension bill per month, are no longer financed only by Social Security, but there are permanent transfers from the state. It is not necessary to expect anything for 10, 15 or 20 years, because the reality today is that contributions do not finance the payment of pensions. This is already the current situation; We can hide it, we can push the ball forward, but I think we have to be able to redefine the scenario of the game, redefine the rules. Inevitably there will be greater constraints that we must understand and also understand how we can generate public benefit and accompany it with more robust plans for individuals and companies, so that the combination of the three elements allows us to eliminate this weakness.

-At what age do you think you should start saving?

-Look, I’m having this discussion with my son now who’s 26. This is very personal. The earlier you start, even if it is a small amount, the better, because progress works wonders, and compound interest works wonders. The earlier you start and the sooner you can contribute, the less effort it will take.

– There is no age, but you should start as soon as possible with the amount you can afford.

-See how helpful it would be for any kid of my son’s generation in similar situations to join a company and see the company start to contribute something to him. The amount of the certificate is completely. The message you are sending to that young worker joining the world of work is brutal from an educational point of view until they even begin to think about that future. The message here is that we must be able to ensure that there is a regulatory environment that allows companies to contribute to their workers. Now there is a lot of talk about “auto-enrolment” (automatically enrolling workers in company plans), which is coming out of Brussels and is already in place in countries like the UK.

-How is the lack of saving addressed in the absence of tax incentives?

-We advocate separating the financial limit from the tax limit, so you can save in retirement plans above the tax deduction limit. We may like it more or less as taxpayers, but the tax cut is what it is. Obviously this does not greatly help in promoting this ultimate savings, but what does not make sense to me is that it restricts my individual freedom to contribute to a product with such characteristics as I consider to be what I consider to be, what I can according to my financial availability. So, one thing is what is financially permitted to be reduced from the tax base, and quite another thing is that an individual’s freedom is limited in deciding to contribute beyond what he or she believes he can or should contribute. This is what we really should be able to make our ruling class see. The tax cut is what it is, but the fiscal limit is removed.

– The government adopts this idea, but what is the meaning of the contribution above the tax deduction? This in itself means a financial penalty, the sector says.

-Product definition. If the tax cut increases, that’s great, but let’s not lose sight of the fact that we’re making contributions to a product, to a pension plan whose definition is an investment. You have quite a wide range of possibilities where you can get a return on the product. If you add tax profitability to the financial profitability of the product, it makes it more attractive. But as a first step, the fact must be achieved that the Spanish citizen has the ability to freely contribute what he can or wants to contribute, thus removing the financial limit. This money is invested in assets, depending on your risk level you will have profitability. The product itself, by definition, has enough benefits that you can consider it a way to save.

– In this sector they are betting on the Basque model of retirement plans, which has greater tax advantages.

-It seems logical. We don’t have to invent anything. If in Spain we already have a regional community with completely different tax treatment, why is this not possible in the rest of the country? You don’t have to go to England, nor to Denmark, nor to Sweden, nor to Germany; Here we have the South Pyrenees. This increasingly dominant market position makes a lot of sense.

– Company pension plans are not being published as the government expected. Does it make sense to make it mandatory in companies?

– This is the discussion on the table, “automatic enrollment.” In industry, we are very active in this discussion, and there are also talks along these lines with the Ministry of Economy. At Mapfre we maintain a not very strict stance, as we embrace this concept but then the worker can decide to leave freely. That there is a hypothetical situation where all workers are in a company pension plan and you have to express yourself out of that system where the company is effectively obligated to its workers to contribute to the company plan for them. However, we have something in Spain that we can also use which is flexible pay. In a flexible wage environment, an employer can now encourage its workers to withdraw a portion of their income toward a retirement plan, or health insurance, with very favorable tax treatment for the worker and at no additional cost to the employer. We hope that “automatic registration” will be implemented in Spain, yes, but with enough common sense that all parties involved will feel comfortable: the employer, the social agents, and the worker himself.

-Do you think that there is a consensus on this, and that there is sufficient vision for the necessity of forcing companies to implement these plans?

-This is always sensitive. When we include the ideological element in this type of discussion, it automatically becomes distorted. If we cannot sit down and talk calmly about the situation, the debate will be distorted. But I’m afraid we’re not able to do that now. We must work together on a solution in which the insurance industry positions itself as a great ally of the public service and right now this situation is not happening the way it should.

– Public benefits numbers have already been done, and the result is that the calculations were not successful.

The numbers are very clear. Now there is a monthly transfer from the state to supplement Social Security to pay the pension bill. We are ready with the various agents concerned to address this situation and do our part in serving the current need which will certainly be greater in the future.