Financial Dictionary - EPSV
Voluntary Social Welfare Entities or EPSVs are non-profit voluntary organisations. They originated in the Basque Country in a bid to create a savings system that would allow members to increase their retirement income. These entities allow citizens and businesses residing in the Basque Country to increase their retirement income and enjoy the same standard of living by spreading or balancing their income pre- and post-retirement.
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As an instrument specific to the Basque Country, these entities are controlled, regulated and supervised by the Government of the Basque Country.
Main features of an EPSV
These entities share the following characteristics:
- They have their own legal personality, and therefore do not need a management company to administer their assets.
- They are not for profit.
- They offer tax relief, as the funds we hold with them can be deducted from our taxable base for personal income tax. And while there is no limit on the contributions we can make, tax relief is capped at €5,000.
- For pension plans, however, this figure climbs to €8,000.
- There is absolute freedom on how often and how much we want to contribute to the plans.
- Contributions can be moved between different existing EPSVs at no cost.
- Upon the occurrence of any of the contingencies envisioned in the regulations of the pension plan, the plan may be redeemed to release immediate liquidity.
- Contributions may be made through the different Voluntary Social Welfare Entities (EPSVs).
- If an EPSV is set up between employer and employee, it is common for both parties to make equal contributions. For privately arranged EPSV, the member will naturally be responsible for making all contributions to the plan.
- As mentioned, there is absolute freedom on how often and how much we want to contribute to the plan.
- The plan can be redeemed upon the occurrence of any of the events envisioned in the contract: Benefit payable upon retirement.
- Benefit payable upon serious illness.
- Benefit payable upon total permanent disability, absolute permanent disability or severe disability.
- Benefit payable upon long-term unemployment.
- Once 10 years have passed from the first contribution.
- Benefit upon death.
In addition, an EPSV may be redeemed in a number of ways: either in the form of capital (in this case tax relief of 40% will apply, provided that more than two years have passed from the first contribution); or as income (in which case a certain amount will be received each month, albeit with no tax relief); or as both capital and income (in this case the tax deductible percentage will only apply to the payment made in the form of capital, subject to a limit of €300,000).