A small majority of major Spanish employers are implementing changes required by a 1995 pensions law, irrespective of the government failure to publish the necessary supplementary regulations.

There has been a clear shift to de-fined contribution (DC) but funding by book reserve which will become technically illegal next year, is still widespread.

In a survey of Spanish employers, conducted by Buck Consultants in Madrid, 39% had taken action to im-plement changes required by the law, with 13% in the process of doing so, with 43% deferring a decision until the publication of the regulations.

A 1987 law allowed company plans fulfilling certain requirements to be-come 'qualified', thus receiving preferential tax treatment. This was am-ended by the 1995 Control and Regulation of Insurance Law which brought non-qualified plans into the framework requiring them to employ a group insurance contract. Book re-serves were made illegal for any plan although there was a three year grace period. However, the failure to publish regulations pertaining to the second law has caused confusion.

Of the 43 firms still in the process of making a decision about funding, 12% planned no change, 21% planned to adopt a qualified employer pension plan under the 1987 law and 25% planned to adopt a group insurance plan under the 1995 legislation with the remaining 42% uncertain about a course of action.

Buck commented: All respondents leaning towards the qualified pension plan vehicle have justified it by its preferential tax treatment. Employers leaning towards group insurance in-dicate that the main advantage is its flexibility in implementing plan provisions that support company objectives."

The majority of the plans surveyed are defined benefit but four out of every five new plans are DC. One in every four of these has adopted what Buck describes as a non-conventional architecture with long term savings promises employing a variety of funding vehicles.

An examination of the types of funding showed that most employee contributions were channelled through the tax efficient investment vehicles of individual pension plans and employ-ee pension plans, but that, despite the law, employer's still made widespread use of book reserves for funding their own contributions, with 46% of em-ployers using book reserves alone.

The survey covered 68 companies and was weighted in favour of those likely to provide a pension plan, name-ly multinationals with over 100 em-ployees and large domestic companies.

John Lappin"

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