Spain postpones outsourcing date
The deadline for outsourcing of pension commitments by Spanish companies has been postponed for a further two years, giving companies – many of which had done little towards externalising their assets – a reprieve from externalising their pension assets by the year-end; the provisional date set in November 1999.
The new date for outsourcing has been set by the government as November 16, 2002. The announcement came on November 28, by José Folgado, the Spanish secretary of state for the economy; only a day after he had announced the new deadline would be set at October 2001.
Observers say that trade unions and employers’ organisations exerted pressure on the government to extend the deadline, claiming that small and medium-sized companies, in particular, would have difficulty meeting the 2001 threshold.
Luis Buey Vilahoz, a consulting actuary at the Madrid-based BBVA’s pensions consultancy department, says: “The unions want to establish the pension funds within the general sectors, where they have major influence, rather than under company control.
“There are two reasons for the delay; firstly, the trade unions have absolute majority in the control committee of the pension funds and secondly, they agreed to the government’s proposal to lower inflation from the current rate of 4% to 2%, which then meant that the government had to give concessions to the unions,” says Vilahoz.
The outsourcing process has been far more complex for employers than the regulatory body, Dirección General de Seguros (DGS), had thought. Over 70% of Spanish companies have yet to comply and so far only one in ten Spanish companies have started corporate pension schemes, representing a total of e13bn in assets.
The process of switching from company pension fund reserves into funded retirement plans starts with the evaluation of the reserves; necessary in finding out, which commitments have to be externalised, and also something that has not been finalised by all Spanish companies.
The choice between a pension fund vehicle and an insurance contract has to be made in agreement with the unions after the evaluation has been completed.
Most companies are opting for insurance contracts, as setting up a pension fund is a lengthy and more expensive process.
Had the deadline not been postponed, companies flouting the law would have been, at least in theory, sanctioned, and their future payments in the externalisation process barred from fiscal deduction.