Maximum pension plan fees have been lowered again

This new reduction is stated in the Royal Decree order that will amend the Regulation of Pension Plans and Funds (RPFP)
Pension plan investors are in luck: the maximum fees applied to these investment vehicles are to be reduced again when the next Council of Ministers approves the reform of the Regulation on Pension Plans and Retirement Funds (RPFP) by Royal Decree.
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Pension plans are subject to two fees:

  • Management fee: One is a fee the management entity charges as remuneration for its services, which involve managing assets in-line with the investment policy to generate the best returns for the investor. This accrues on a daily basis and is an inherent fee; which means that it is already deducted from the net asset value of the amount subscribed by the investor or the amount repaid on the investment.
  • Deposit fee: The other fee is charged by the deposit entity, which is responsible for holding investment securities. As with the management fee, this fee accrues on a daily basis and is inherent to the investment.

New pension plan structure

Since 2014, the maximum management fee that may be applied is 1.50%. Prior to this date, the maximum fee had been 2%. The reform proposed by the Executive seeks to adapt the maximum fee to suit different investment fund policies in order to reduce the fees charged on more conservative investment funds. Three tranches have been established:

  • 1. Fixed income (no exposure to equities): 0.85%.
  • 2. Mixed fixed income (maximum exposure to equities of 30%): 1.30%.
  • 3. Other (minimum guaranteed exposure to equities of 30%): 1.50%.
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For the "mixed fixed income" and "other" categories, this fee may be replaced by a fixed fee of 1% of the value of the deposit account and 9% of the income statement. This second fee of 9% will only be applied when the daily net asset value of the pension fund is higher than any other previous value. For such purposes, the maximum daily net asset value of the pension fund will be taken into account for a period of three years.

The maximum deposit fee, which in 2014 was reduced from 0.50% to 0.25%, will be set at 0.20%.

Sources from the Ministry of Economic Affairs argue that it is important to make pension plans attractive, particularly to young people, for whom small contributions may generate a substantial saving by the end of their working life when they are set to retire.

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