Steps to opening a pension plan

We will explain how to take out this savings and investment product.
It's never too soon to start saving for retirement, and pension plans are a savings and investment product specifically designed for this purpose. Although there are different plans for all types of investor profiles, they all have one thing in common: the sooner you start to save, the better the results you will obtain, and the less effort you will need to put in to meet your goals. Read on to learn about the steps for opening a pension plan.
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Defining your pension plan profile

The first step is to identify the profile of the person opening the pension plan. The customer's personal and financial characteristics help to ascertain the most suitable type of plan.

One of the first factors to be considered is the applicant's age. You do not necessarily need to be nearing retirement age to open a pension plan. In fact, it is best to start a plan as soon as possible, ideally when you enter the labor market. However, your age will influence what type of savings strategy is best for you. The risk profile is another crucial factor. The capacity of a saver to bear losses is useful in deciding what level of risk the plan should have. In general, the greater the risk, the higher the potential return, but also the greater the potential losses. Therefore, more aggressive options should only be adopted if retirement is a long way off and the investor has this type of risk profile. On the other hand, if the investor has a conservative risk profile, it is best to look for more secure options and more conservative plans. This approach also applies when you are nearing retirement.

It is important to remember that withdrawing funds from your pension plan is restricted by certain conditions and special circumstances. Although today there are more and more circumstances in which you can obtain your pension money, it is important to understand that unless you meet these conditions and circumstances, you will not be able to access your funds.

Comparing pension funds on the market

After deciding on an investor profile and savings strategy, the next step is to analyze and compare the different plans available on the market to find one that best meets your requirements.

Although it is a good idea to consider plans recommended for certain ages, it is also advisable to assess their individual risk level. All pension plans are rated from 1 to 7, 1 being the lowest level of risk and 7 the highest. Also, please remember that variable-income pension plans invariably involve a higher level of risk than fixed-income plans, as they are more influenced by fluctuations in the market. For more conservative profiles, there are also guaranteed pension funds which ensure that you recover all or a percentage of the invested capital, and often a certain level of return.

Another factor to consider when opening a pension plan is the required minimum amount for the first and subsequent contributions. Typically, you can make small contributions on a regular basis, for example, around €30 per month. However, you must also check what fees (management and deposit fees) are included in the plan.

Opening a pension plan

After assessing all the variables and terms and conditions of the different plans, the next step is to open one. Most pensions plans are opened in banks. However, they can also be offered by insurance companies and collective investment schemes management companies (SGIIC).

In general, opening a pension plan is just like taking out any other financial product, and can be done online or in person. To open a pension plan online, you will need to log in to your online banking system and follow the instructions. Alternatively, if you want to open a pension plan in person, visit a bank branch, and you will be guided by a member of staff. Importantly, if you want to open a pension plan with a bank where you are not currently a customer, you will most likely have to open a savings account with that bank first.

Before signing the contract, please read it through carefully and check that the terms and conditions are in line with your interests and profile. The "Plan specifications” section will detail all the features of the pension plan, including the risk category, modality, benefits, etc. You should always resolve any questions and check the meaning any clauses that you don’t understand.

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Important points about pension funds

Once you have opened a pension plan, it is worth thinking about a few points. Firstly, most experts agree that it is better to make regular contributions to the plan. Various studies show that this method of saving yields better results than making a single contribution at the end of the year. This is because the fluctuations in the market are cushioned by obtaining an average acquisition price for different contributions.

Secondly, don't forget that, as an investor, if you are not satisfied with the performance of your pension plan, you can always transfer your investment to another plan. What’s more, if you choose to take this route, you will not be required to pay any taxes for any returns obtained up to that moment.

Finally, it is advisable to redeem your money in the form of income. Redeeming the full amount all at once can lead to an excessive increase in the total annual income that is subject to taxation. Moreover, your accumulated savings made through tax-exempt contributions may be wasted due to an increase in your marginal rate and tax bill.

At BBVA, we want you to obtain the best possible return on your retirement savings. Therefore, we offer a wide range of pension funds designed for the different profiles of our customers. Visit bbva.es or any BBVA branch to review the terms and conditions.

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