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Three players rule the roost

Management of pension assets in Spain is dominated by a few large financial institutions and insurance companies. The three largest account for nearly 45% of total funds invested; the top ten represent just over three quarters. Most of these manage both second and third pillar schemes.To be registered, a management company must have a minimum stated capital of just over E600m.
Taking second and third pillar schemes together, Spanish bank BBVA is the largest player with just short of 20% of total pension fund assets at the end of last year. However, this is down to around one percentage point on the bank’s share at the end of 2002 and around 2.5% down on its total share at the end of 2001.
Within the 2003 total, BBVA leads the second pillar sector with just over 24% of pension assets; the bank’s assets are approximately equally distributed between second and third pillar schemes. By contrast, SCH (Santander) has around 85% of its assets in third pillar schemes and leads the sector with a share of nearly 24%.
Second to BBVA overall is La Caixa which has moved up from third place with a market share of 9.6% at the end of 2001 to second with a share of 13.4% at the end of 2003. This has been due to strong performance in the second pillar sector where it has nearly doubled the assets it has invested there to E4.1bn during that period.
The employment system, or ‘sistema empleo’, is Spain’s second pillar pension sector. Development of the second pillar system has been slow. At the end of last year membership stood at just under 700,000, even though corporate schemes have been in existence since 1987. Total assets stood at E23.5bn.
Legislation introduced during 1997 and 1998 stipulated that all in-house pension funds had to be externalised, the deadline for which was November 2002. The ruling was waived for banks and other financial institutions.
One reason for the slow development of the second pillar system has been the extraordinarily generous state pension system which guarantees salary replacement of up to 94% of final salary for those who earn up to the contribution ceiling which stood at E31,824 last year.
A new decree came into effect in February which is intended to stimulate development of the second pillar, and many in the industry are agreed that the very expensive first pillar is in urgent need of reform to avoid a severe funding crisis.
The third pillar, or ‘sistema individual’ has, by contrast, attracted significant membership which stood at over 6.5m at the end of last year, or around 34% of the total employed population, compared with just 3.6% in the case of the second pillar system.
This is due in part to the fact that salary replacement in the first pillar drops quite sharply beyond the social security ceiling, and in the absence of a developed second pillar many better-paid individuals have no option but to make their own pension arrangements.
Much smaller is the ‘sistema asociado’ which consists of schemes sponsored by trade unions, syndicates or associations. At the end of 2003 total assets were E839m and there were 88,193 members.

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