How are Spain's pension funds doing?

While the average returns for Spain's government bonds and its benchmark IBEX-35 index were over 5 percent between 2001 and 2016, its pension funds didn't fare as well. Why?

From 2001 to 2016, Spanish pension funds' average return was just 2.03 percent. That was considerably lower than the average annual return for the country's benchmark IBEX-35 index (5.24 percent) or for its government bonds (5.27 percent). What's more, only three pension funds (out of 335 in total) posted a higher return than the 15-year government bonds over the same period.

After crunching the numbers, professor Pablo Fernandez and his research team question the 2 percent annual commission charged by fund managers. They also question the current tax incentives meant to encourage fund investment, suggesting that individuals might do better on their own — especially if they could enjoy the same tax breaks that the pension funds now have.

How these pension funds are faring matters to many: As of December 31, 2016, 7.1 million investors had a combined 65.3 billion euros invested in Spanish pension funds.

Methodology, very briefly

The report analyzes the average annual profitability of Spain's 335 pension funds for 15 years (between December 2001 and December 2016) based on data from INVERCO. Returns for the Ibex-35 index and government bonds are according to Datastream.