The coronavirus epidemic is causing significant damage to the economy. The public pension system is no exception and its situation, already critical in itself, is going to be aggravated by the increase in unemployment. In these circumstances, it is advisable to take action before it is too late: experts consider that gold is the best formula to protect assets and prevent purchasing power from falling when you reach retirement age.
The economic data begins to reflect the seriousness of the situation that lies ahead once the Covid-19 epidemic has reached its point of highest incidence and begins to subside.
Indeed, during the first quarter of 2020, GDP suffered a 5.2% drop compared to the previous quarter. This is the biggest drop in the economy since the INE began its historical series, in 1970.
Even in the 2009 crisis, there was no such setback: in the first quarter of that year, GDP contracted by 2.6%, in what was its biggest drop to date.
The paralysis of the economy caused by the declaration of the state of alarm on March 15 has been the main cause of this collapse, which could be even worse in the second quarter of the year.
Crisis In Social Security
- The situation of the Social Security fund is not rosy either: at the end of 2019, its deficit had risen to 16,052 million euros, 1.3% of GDP . According to the Institute for Economic Studies , this deficit will grow at least to 3% of GDP, which is equivalent to a hole of 37,350 million euros .
- One of the reasons why this deficit is skyrocketing is the collapse of social contributions by workers and employers, which constitutes the main source of income for the system.
- A situation that could get worse, since the Ministry of Labor estimates that unemployment will increase by another three million people between now and the summer, to which will have to be added a million and a half self-employed who are going to stop paying their quota.
- Faced with this disaster, the so-called 'pension piggy bank', which came to have 66,815 million euros in 2010 , now barely has 1,400 million , insufficient for a monthly expense of about 10,000 million euros on pensions .
- The solution to which the Government has been resorting in recent months, of financing the expense of pensions through loans or transfers to Social Security, is not such, since as they point out from the Foundation for Applied Economics Studies (FEDEA) , that only serves to change the site problem.
Pension Plans In Free Fall
Nor does the pension problem seem to be solved by relying on other assets that have traditionally been presented as complementary to the public system: private pension plans .
According to the latest data published by the consultancy Vdos , all pension plans have obtained a negative return during the first quarter of 2020.
In total, the assets managed by the pension plans of the individual system have been reduced by 7,474 million euros during the first quarter of the year, a fall of 9.68% that leaves the total at 69,754 million.
By categories, the best results were those of monetary pension plans , with an average drop of 1.44% , followed by guaranteed fixed income ( -1.48% ) and international fixed income (-1.81%) .