The year brought challenges for retirement plans. Social welfare instruments saw a 32% drop in their gross contribution margin last year, with 1,709 million compared to 2,529 million the year before, according to the latest figures from the employers’ association Inverco. Contributions to individual plans stood at -667 million euros, marking a second consecutive year of negative contributions and resulting in 1.709 million contributions alongside 2.376 million in gross benefits.
The shift reflects a €4,380 million outflow over two years, a change that prompted the sector to seek new fund inflows to sustain asset growth. The personal income tax regime lowered the maximum deductible limit for individual plans in 2022, moving from 2,000 euros to 1,500 per year. This reduction in tax advantages followed a prior cut from 8,000 euros per year to 2,000 euros per year in 2021.
Earlier years showed steadier growth, with a total gross contribution margin of 3,586 million in 2018, rising to 4,090 million in 2019 and 4,314 million in 2020. In 2021, as the first phase of tax incentives for individual products began, a notable jump up to 2,539 million was recorded, according to Inverco data on the monthly evolution of individual plans.
collective plans
Recent adjustments align with lower deduction limits and a rise in contributions to retirement plans tied to employer contributions. Up to 2022, the exemption limit on company plans stood at 8,500 euros per year.
In addition, market adjustments have played a significant role. Changes in both variable income, such as stock markets, and fixed income, including public and private debt, led to a decline in the accumulated assets of private pension plans.
By December, the asset volume within the individual system pension plans reached 80,234 million euros, down by 2,185 million from the prior month. For 2022, one-year profitability stood at 10.1%, while a three-year horizon reflected -0.8% due to market corrections. Over the long term, the 26-year perspective shows an improvement up to about 2.5%. This dataset includes 861 Individual System Pension Plan samples and 7.4 million participant accounts.
Inverco’s data indicates that the employment system did not increase gross contribution margins in the first nine months of the year and instead declined against the previous year. Net benefits across all system categories rose by 446 million euros compared with the same period in 2021, reaching 722 million euros in total.
Retirement plans, including individual and group schemes, in the third quarter saw a decrease in assets by 2,571 million euros, bringing total assets to 114,524 million euros. Inverco notes that heightened volatility in financial markets driven by geopolitical tension and inflationary pressure, along with fears of recession, triggered corrections in both stock and bond markets.
Overall, the assets held by employee pension funds declined by 1.9% in the third quarter from the previous quarter, totaling 34,471 million euros in assets. The total number of participant accounts reached 1,908,148 as markets continued to recalibrate and investors reassessed risk across portfolios.