Spain must expand supplementary pensions and overcome decades of deadlock, with mandatory or quasi-mandatory auto-enrolment among the key measures needed to increase participation, according to VidaCaixa director, Carlos Quero.

Speaking at the CBBA-Europe Annual Conference, Quero highlighted Spain’s reliance on public pensions and the limited role played by occupational and personal pension schemes, arguing that the country needs a clear long-term strategy to develop its supplementary pension system.

“In Spain, public pensions are bigger than any other country in the Organisation for Economic Co-operation and Development with a replacement rate of 80 per cent. They cost 3.6 per cent of GDP and are expected to hit 16 per cent in 2050,” he said.

“By contrast, only 1 per cent come from second and third pillar pensions.”

Only three million workers are covered by personal pension plans out of a workforce of approximately 22 million, representing a coverage rate of around 14 per cent.

Quero identified two major obstacles to expanding supplementary pensions: an unresolved constitutional debate over auto-enrolment and difficulties reaching agreement between employers and trade unions on occupational pension provision.

“There is an article of the constitution that says all private pensions should be voluntary, and this wording has led to an unresolved debate,” he explained.  

According to Quero, one side of the debate argues that companies cannot be forced to promote a pension scheme and to contribute to it, as it is “unconstitutional to force companies on a mandatory basis”.

Meanwhile, the other side argues that companies can be forced to promote a pension scheme provided that there is an option for the employee to opt out in order to preserve their freedom of choice.

Quero argued that the debate should not prevent progress, stressing that a pragmatic decision needs to be made instead of continuing the discussion on this that has been happening for the past 20-30 years.

The second challenge is finding common ground between employers, who are concerned about additional labour costs, and trade unions, which want to ensure that pension arrangements benefit employees without disproportionately affecting lower-paid workers.

Quero argued that these positions could be reconciled through a more creative approach to pension design.

One option would be to offer companies and employees additional points or advantages in public procurement procedures to help offset the cost.

He also suggested introducing lower contribution rates for low-paid employees rather than excluding them from auto-enrolment altogether, as the public pension system already covers lower earners.

Another possibility Quero proposed would be to redirect existing employee benefits into pension contributions, avoiding the need for additional out-of-pocket payments.

Quero called for a pragmatic, phased approach, suggesting that Spain could learn from Italy rather than wait for a comprehensive agreement before introducing reforms.

If the parties cannot reach an agreement on a new collective pension scheme immediately, Quero suggested that employers could initially enrol in an existing collective pension scheme until a permanent arrangement is agreed.

Alternatively, he said employees could initially join individual pension schemes, with their accumulated savings transferred to the collective scheme once an agreement is in place.

“We have to take drastic measures. It is not necessary to have a perfect agreement, but it might be feasible to have a basic agreement that can be built on in the future. We need to take the bull by the horns,” he said.

“In Spain, we must acknowledge that we have no long-term roadmap. This is basic. And we have been discussing, for several years, and I think it's high time to take a decision in order to avoid or to prevent people from being forgotten.”

He also highlighted the challenge of implementing European-level recommendations in an area that remains largely a national competence.

Looking ahead, Quero called for a dedicated commission focused exclusively on supplementary pensions.

He explained that Spain has had a pensions committee since 1995, but he noted that only one of the 21 recommendations in its 2020 report related to supplementary pensions.

He also advocated mandatory or quasi-mandatory auto-enrolment, arguing that voluntary participation alone has not proved sufficient to expand coverage.

“I am not aware of any single country that has been successful with voluntary auto-enrolment. I recommend mandatory or quasi-mandatory auto-enrolment. I think it is the solution,” he said.

Quero also called for a stable framework of tax and non-tax incentives, including an increase in the personal tax-relief limit, and for simplicity.

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