Three quarters into retirement, many regret not saving more. With Spain facing a dip in savings, now at 7.2% of GDP in 2022, it is far from the lockdown peak of 17.7% and hours worked remain low, even though a standout product like private pension plans remains available through the current government. With ongoing tax benefits shrinking, starting a piggy bank today feels more essential than ever.
Experts agree that pension reform does not guarantee results. The financial sustainability of the system itself is in doubt. Institutions such as the Bank of Spain project adjustments to keep the pension system viable by 2025, while the Independent Financial Responsibility Authority warns of imbalances in revenue and spending. The concerns extend beyond future pensions to the overall standard of living in retirement.
In light of these factors, analysts and investors were asked what steps could bolster public pensions and preserve quality of life in retirement. Data from the National Institute of Statistics show that the average salary for Spaniards aged 55 to 59 sits at 28,240 euros per year (2,354 euros monthly) and the typical pension is 1,372 euros. By age 67, about 982 euros per month would be needed to maintain the same standard of living. When asked about savings plans for different ages, financial experts converge on a single message: the sooner savings begin, the better. Another key tip is to understand personal needs and educate oneself before choosing any financial instrument.
In youth, earnings are often lower as careers begin, and many people take on mortgages while couples plan families. During this stage, it is crucial to cultivate saving habits that will endure through to retirement.
Experts recommend several options: pension plans, mutual funds, and related products. In the early career stage, establishing a pension plan is advised. “Anyone who works should consider a retirement plan,” says Dositeo Amoedo, president of the Association of Educators and Financial Planners. There is no need for large contributions, since the annual limit is 1,500 euros and these contributions can be deducted from the income tax. Enrique Rodríguez, head of pension plans at ING, concurs: these plans create a solid long-run buffer and are excellent products to start as early as possible.
Mutual funds are another route. They are taxed only on the savings base when sold and on capital gains, with no tax penalties on redemption. They tend to be cheaper than pension plans and their capital can be used for any purpose, including retirement. They are flexible and suit many ages and situations. A similar option exists with unit-linked life savings insurance offered by insurers. These focus on investors who can take risks.
gaining liquidity
From age 40, experts recommend seeking greater liquidity. If a retirement plan or mutual fund already exists, it may be worth broadening horizons. “Discipline is essential, and one should not siphon off savings intended for retirement for short-term uses,” notes José Carlos Guerrero, a tax and estate planning consultant at Tressis.
Here, a notable product emerges: the PIAS, or individual systematic savings plan. This life-saving insurance allows saving up to 8,000 euros annually and can be converted into a lifelong annuity at retirement. It offers a personal income tax reduction of up to 40% if funds are not withdrawn before age 67. If funds are withdrawn early, capital gains taxes apply.
Finally, redirecting investments toward more conservative portfolios is key at this stage. An important addition is keeping retirement savings uninterrupted and avoiding the urge to cash out for short-term needs, says Patricia Suárez, president of Asufin.
From the age of 40, experts highlight the importance of building liquidity. The long view matters, and the discipline to keep funds for retirement is central to success.
From the age of 50, retirement is within sight, and the focus shifts to securing profits rather than risking lifetime savings. Eva Valero, director of Vida Ahorro y Pensiones, suggests gradually converting variable income to fixed income around age 65 to protect savings. Hedging a portion of risk remains prudent. Suarez emphasizes consolidating earnings through monetary or guaranteed products.
One instrument that has drawn attention in the years before retirement is SIALP, or individual long-term savings insurance. With an annual limit around 5,000 euros and a minimum five-year term, no capital gains are paid upon withdrawal. This can be advantageous for those with less than five years to retirement, Amoedo notes, since the long-run gains may not justify the arrangement otherwise. If the five-year horizon isn’t met, the purchase power benefits can be limited or negated.
Ultimately, the strategy involves investing more aggressively earlier and then transitioning toward more conservative allocations as retirement nears. Saving more now, and choosing the right mix of products, can make a meaningful difference when retirement arrives.