“Tax breaks are not attractive enough to incentivize long-term savings”

In MAPFRE AM’s last Interview of the month, we spoke with Carlota Vivas, Deputy Director of the Review and Control Department at MAPFRE Vida Pensiones, who highlighted the main compliance challenges as “the excessive regulation in recent years and the speed at which firms must adapt to the new regulations.” Regarding the current regulations on pension plans and funds, she points out key weaknesses, such as the limited appeal of tax breaks for contributors, which significantly discourages widespread long-term savings.

• How long have you worked at MAPFRE Vida Pensions and what are your responsibilities?

I’ve been at MAPFRE for 24 years. More than 15 years in different legal areas and departments of the Group. Since 2019, I’ve been working in Compliance Areas. Specifically, in April 2022, I joined MAPFRE VIDA PENSIONS, where I currently serve as Deputy Director of the Review and Control Department (Regulatory Compliance).

My primary responsibilities encompass analyzing regulations impacting the management company, reviewing control procedures mandated by current laws, and ensuring the continuous update and compliance with relevant rules and policies. Moreover, I oversee coordination with various departments to support the development of new products and ensure operational alignment with emerging legal requirements. I also provide internal advisory on compliance matters and report findings, including any issues, to the Board of Directors.

• What do you consider to be the primary challenges in terms of compliance?

The increasing regulatory burden in recent years, coupled with the need to rapidly adapt to new laws—whether to create frameworks for new products or adjust existing ones. This makes it challenging to implement and evaluate new procedures promptly, as well as to update the relevant documentation accordingly.
Equally important is fostering a robust internal culture of compliance, where all departments actively contribute to embedding compliance into daily operations. It’s vital that everyone understands the importance of regulatory adherence and its direct impact on business processes.

• How is compliance risk affected by the new regulations?

New regulations that bring significant changes to existing laws require organizations to adapt effectively. Often, these regulations impose increased demands for transparency, control, and documentation, resulting in additional resource and tool requirements, sometimes with little room for seamless integration into current processes. Failure to implement these changes effectively can heighten the risk of non-compliance, potentially leading to penalties and reputational damage in severe cases. Therefore, it’s crucial for companies to adopt a flexible and proactive compliance strategy, leveraging technology and continuous training for their staff.

• In your opinion, what are the strong points of the current regulations on pension plans and funds?

One of the regulations’ key strengths is their emphasis on protecting participants and beneficiaries. There are clear and stringent mechanisms in place for supervision and transparency, ensuring that funds are managed with prudence and responsibility. Additionally, the robust risk control framework requires maintaining adequate levels of solvency and liquidity. The regulations foster competition and good governance, ensuring that management companies uphold high standards of professionalism and diligence. Additionally, the role of the Control Commission has been enhanced, serving as an extra layer of protection for participants’ rights. In summary, the regulations aim to strike a balance between securing citizens’ savings and providing the necessary flexibility to manage funds in an ever-evolving environment.

• And the weak points?

One of the significant weaknesses of the current regulations governing pension plans and funds in Spain is the inadequate incentives to encourage greater participation from companies, employees, and the general public. Despite the stringent regulatory framework, tax breaks for contributors are not attractive enough to incentivize widespread long-term savings. Moreover, there is a lack of commitment from the government regarding tax policies associated with withdrawing from these plans.

It’s important to emphasize that young people often have a short-term mindset, making it challenging to communicate the significance of long-term financial planning. Additionally, the regulatory framework can be overly complex and challenging to navigate. As a result, current regulations do not address the increasing anxiety among young Spaniards about the viability of their future pensions. Many have yet to realize the necessity of supplementing their pensions with income from their savings. The two systems are perfectly compatible, and transparency is essential at this point. In occupational pension plans, there will be an obligation to report the projected future retirement benefits starting in 2025. Nevertheless, the public sector should take the initiative to ensure that individuals can access information about their expected public pension. This is crucial for encouraging complementary investment strategies for the medium and long term.

• How do you envision the pension sector evolving in the coming years?

To maintain growth, it’s crucial to continue investing in the second pillar (employment-related pensions) and the third pillar (individual savings). However, collaboration with legislators is essential for effective progress. Strengthening the third pillar and developing medium- and long-term savings instruments is vital. As highlighted earlier, the aging population and rising life expectancy will place significant pressure on the system. Consequently, enhancing private pension plans as a complement to the public system is more important than ever.

I envision a significant increase in the digitalization of fund management, leveraging new technologies to optimize processes and improve transparency.
With an optimistic outlook, we hope that regulatory reforms will focus on enhancing the attractiveness of tax incentives for both businesses and individuals. Furthermore, fostering financial literacy will be crucial in helping people recognize the importance of saving for retirement.

In conclusion, there is a critical need for enhanced information and transparency in both the public and private sectors, particularly regarding the estimated amount of retirement pensions communicated to workers and participants. Additionally, it’s essential to continue developing more flexible and personalized management models. At the European level, I believe regulators will prioritize the harmonization of sector regulations to enable the development of European pension plans.

Hobbies: Nordic walking, scuba diving, and traveling. Visiting art and decoration exhibitions.

A favorite dish: Tons! Any Spanish stew. I also like Asian food.

A city/country: The diversity of Spain: I love Ibiza and Formentera, the USA, and I always enjoy Portugal.

Favorite musical group/singer: From opera to heavy metal! If the music is good, I can appreciate any genre. In general, I like English and American rock and roll.