80% of Portuguese pension plans bring in zero for holders

Eighty percent of Portuguese ISAs or PPRs as they are called in Portugal, bring their beneficiaries next to nothing once charges have been levied.

The average annual return on PPRs over the past decade was only 1.16% according to a study from Casa de Investimentos, and in the majority of cases, the return was less than the charges levied by the financial institutions managing these savings products.

The instability experienced in the financial markets in 2022 affected not only stocks, which registered sharp falls, but also bonds against a backdrop of rising interest rates.

This eventually had an impact on the profitability of Retirement Savings Plans (PPR), both in the form of insurance and funds, with the latter recording negative returns.

Although this trend has already been reversed, profitability remains low for these savings products, with 80% of PPRs showing, in the last decade, a lower return than the commissions charged by the entities that manage them.

Two years ago, the average profitability of PPR funds -11%, in a period marked by the war in Ukraine, which increased inflation, forcing central banks in the US and Europe to raise interest rates to control prices.

An increase in rates has created fears around an economic recession, leading equity markets to see sharp declines. While the European benchmark Stoxx 600 lost more than 10%, the US equity indices fell almost 20%.

This scenario eventually changed, with returns returning to positive terrain. Between the end of 2023 and the first 10 months of this year, the average return on PPR funds was 5.72%, according to data from the Portuguese Association of Investment, Pension and Equity Funds (APFIPP) made available to news desks.

Nevertheless, in the last three years as a whole, between October 2021 and October this year, PPR profitability stood at only 0.27% and just over 1% when looking at the last 10 years, falling in most cases below the charges charged by managers.