These are savings products through which, by making voluntary contributions, certain economic provisions are guaranteed when the person reaches retirement age, as a complement to whatever the person is entitled to for having contributed to a public pension system (which in Spain is known as Social Security). In other cases, also linked to the pension plan concept, what is insured is a specific economic amount when the insured person reaches an agreed age, or contracts a disease, or suffers an accident that causes a state of permanent disability, dependence, or death.
The benefits are the economic right of the beneficiaries of the pension plans as a result of the occurrence of a contingency covered by the plan. These could be: in the form of capital, consisting of a single payment; in the form of income, consisting of two more successive payments on a regular schedule; or mixed, combining an income of some kind with a capital payment.
The instrument used to manage these contributions is called a pension fund.
Pension plans involve three main elements:
- The sponsor of the plan: this is any company, society, enterprise, corporation, association or syndicate that promotes its creation or is involved in its management. It must be a legally established and authorized entity.
- The participants: these are the individuals in whose interest the plan has been set up, regardless of whether they make contributions or not.
- The beneficiaries, being understood to be the physical individuals entitled to receive the benefits, whether or not they have contributed to them.
Depending on who is promoting them, pension plans can be:
- Individual: whereby a person takes out a plan with a financial entity independently and at their own initiative.
- Employer’s: in these cases the sponsor is a specific company. The plan is a form of remuneration for its employees.
- Associated: these are plans contracted for a specific collective. The sponsor is usually an association and the participants are its members.
The financial entity whose sole mission is to manage the assets in the pension fund is known as the fund manager, and the entity that safeguards the contributions to the plans is known as the depositary entity or institution.