Features and help

What is it?

Pension plans are a safe and profitable form of long-term savings that make it possible to guarantee your current standard of living in retirement.

A savings plan is profitable from the day that it is arranged, as if offers unbeatable tax advantages.

Why do I need a pension plan?

The current situation of the Social Security regime is difficult and expectations about its future development suggest that the public protection system will only provide a minimum level in future.

Pension plans are undoubtedly the best way to complement the state pension, due to their returns and tax advantages.

What are the advantages of pension plans?

Along with their returns, their major advantage is their tax treatment. Contributions to pension plans are subtracted from the income tax base. This is a direct saving and can result in paying a lower tax rate by reducing the tax base.

How can I access my savings?

You can access your savings as capital, income or a combination of the two.

When can I access my savings?

Although pension plans are designed to provide savings to enjoy after retirement, as a supplement to your state pension, as from 2025 you will be able to draw down units that are 10 years old. All amounts drawn will be taxed as income from work in personal income tax (IRPF).

You can also access your savings in the following cases:

• Retirement or similar situation, including as part of an approved redundancy programme.

• Total permanent disability for your usual profession, absolute disability for all work and major disability, death, severe dependence or major dependence.

Exceptionally, you may draw all of the capital, in the following cases:

• Serious illness of the investor, their spouse or an ascendants or descendants of the first degree, or a person who lives with the participant under a guardianship or fostering regime and is dependent on them.

• Unemployment, for which you must meet the following requirements:

• No right to unemployment benefits through contributions made, or having exhausted such benefits.

• To be registered as a job seeker with the corresponding public employment service at the time of the application.

• The consolidated rights of self-employed workers who were previously part of a Social Security scheme in that capacity and have ceased their activity may also be made effective if the requirements in paragraphs one and two are met.

Tax deduction for Pension Plans contributions

Reductions for pension contributions and payments are, in general, limited to the lower of:

• 30% of net income from employment and economic activities received individually during the financial year.
• 1.500 euros annually. This limit is increased by the following amounts:

1) By 8,500 euros per year if it comes from employer or employee contributions to the same pension instrument for amounts equal to or less than those shown below, depending on the employer's annual contribution:

A multiplier of 1 is applied when the employee's gross income from work in the year is more than 60,000 euros from the employer making the contribution. Amounts contributed by the company resulting from decisions by the worker are considered contributions by the worker.

2) By 4,250 euros per year, provided that this increase is from contributions by self-employed workers or sole traders to simplified employment pension plans for self-employed workers/sole traders, or from contributions by individual entrepreneurs or professionals to employment pension plans of which they are promoters and beneficiaries.

The maximum reduction applied for the increases in points 1) and 2) above will be 8,500 euros per year. An additional 5,000 euros per year for collective long-term care insurance premiums paid by the company.

In the case of spouses, the maximum contribution limit with the right to reduction based on contributions to social security schemes where the spouse is the holder (provided they do not obtain net income from work or economic activities or this income does not exceed 8,000 euros per year) is 1,000 euros per year.

Disabled people (people with a physical disability of at least 65%, a mental disability of at least 33% or who are legally declared to be disabled regardless of the degree) may reduce their contributions to the plan from the taxable base up to a limit of 24,250 euros. This is a joint limit for contributions made to plans, mutual social welfare funds and assured benefits plans.

People who are related to or who are guardians of the disabled person may deduct the contributions made to disabled people from their tax base, with a maximum annual limit of 10,000 euros.

Total deductions made by all persons who make contributions in favour of the same disabled person, including those of the disabled person himself, may not exceed 24,250 euros per year.

Tax reduction for voluntary pension scheme contributions

An EPSV voluntary pension scheme is a product aimed solely and exclusively at residents of the Basque Country, which has a different tax system.

Contributions made by members, unit holders, policy holders or insured persons to individual social security systems are deducted from the personal income tax base with an annual limit of 5,000 euros.​ An additional 4000 euros is available for contributions made by self-employed workers—excluding working members or employees of cooperatives and work-owned companies—to employment social security systems in which the unit holders or members are self-employed workers, or to employment social security systems for taxpayers who do not have employees. The annual limit for employer contributions is 8,000 euros. The combined annul limit of reductions for personal and employer contributions to social security schemes is 10,000 euros.

Contributions that have not benefited from a tax deduction as they were above the established limits, or due to an insufficient tax base, may be deducted in the following five fiscal years provided that the holder is not retired.

Wife/husband: if the unit holder has a spouse with an income to be included in the tax base of less than 8,000 euros, he or she may deduct the contributions made by the spouse to plans, mutual insurance companies and voluntary pension schemes in his or her tax base, by up to a maximum of 2,400 euros per year.

Disabled people (people with a physical disability of at least 65%, a mental disability of at least 33% or who are legally declared to be disabled regardless of the degree) may deduct their contributions to the EPSV plan from the tax base up to a limit of 24,250 euros. This is a joint limit for contributions made to plans, mutual social welfare funds and assured benefits plans.

People who are related to or who are guardians of the disabled person may deduct the contributions made to disabled people from their tax base, with a maximum annual limit of 8,000 euros, notwithstanding the contributions they may make to their own Voluntary Social Welfare Entities.

Total deductions made by all persons who make contributions in favour of the same disabled person, including those of the disabled person himself, may not exceed 24,500 euros per year.

How Pension Plans are taxed at the time of redemption

Pension plan benefits are always considered to be employment income and are taxed according to the way in which they are redeemed.

When used in the form of capital or sole source of income:

Amounts for contributions made up to 31.12.2006 will have a 40% reduction on the contributions and on their yields. The period established to benefit from this reduction in the marginal tax rate will depend on the date on which the contingency was carried out. The following table shows the different cases

The remaining 60% will be added to the tax base.

100% of the amounts corresponding to contributions made since 1 January 2007 will be added to the Tax Base.

When used in the form of income or regular benefits.

In this case 100% is added to the Personal Income Tax Base.

How voluntary pension schemes are taxed at the time of redemption

When used in the form of capital or sole source of income. If 2 years and one day have passed since the first contribution, an exemption of 40% applies. The remaining 60% is added to the Tax Base, for the first 300,000 euros, while the remainder is integrated at 100%.

When it is used in the form of regular income. In this case 100% is added to the Personal Income Tax Base.

What is the difference between a pension plan and an EPSV?

Both products share the same goal and many characteristics, but EPSVs are only open to residents of the Basque Country. Other differences include the maximum annual contribution limit allowed for each product and slight differences in the contingencies for liquidating the accumulated wealth and the taxation of the redemption option you choose.

When can I access my savings?

Although pension plans and EPSVs are designed for retirement, as of 1 January 2015 you can access your savings if your pension plan is more than ten years old. Plans subscribed before that date may be accessed from 1 January 2025, including their returns.

All pension plans and EPSVs also have a range of contingencies that allow access to the savings, such as serious illness of the unit holder or family members, unemployment, disability or dependency.

Does it make sense to invest in a pension plan or EPSV if I am still young?

In the case of long-term savings, time is an important factor that works in your favour. Therefore, the sooner you begin, the better the results; or you save the same amount but with less effort. In the long term, if you reinvest the return your savings accumulate, time reduces the risk and the tax savings are also greater. This is clearly illustrated when we compare two people, one of whom starts saving a monthly amount of €125 at age 36 (Mr A), while the other person saves the same amount but starts at age 46 (Mr B) (1):

When Mr A retires, he will have accumulated €76,030, broken down as follows: €46,500 in contributions, €29,530 in returns, and €17,205 in accumulated tax savings derived from the pension plan contributions.

When Mr B retires, he will have accumulated €43,603, broken down as follows: €31,000 in contributions, €12,103 in returns, and €11,655 in accumulated tax savings derived from the pension plan contributions.

Conclusions of both (Mr A and Mr B) contributing the same amount:

Mr A manages to accumulate 74% more wealth upon retirement. He has achieved 143% more in returns.

Ideas on how to improve it:

• Reinvesting the tax savings each year (€555 per annum) would allow Mr A to accumulate another €28,100, taking his accumulated wealth upon retirement to €104,000.
• Increase the regular contribution each year by a manageable amount (e.g. 2% each year, the salary increase percentage, the CPI, etc.). For example, increasing it by 2% annually (contributing €127.5 per month in the second year instead of €125, and so on) would increase the accumulated wealth to €99,300, which added to the €28,100 from reinvesting the tax savings would take the total wealth to €127,400.

¹Calculations based on the following hypotheses: average annual return on investment of 3%, gross annual salary of €40,000, retirement age of 67 years, marginal personal income tax rate of 37%.

How can I receive my savings when I retire?

There are various ways. You can receive your savings as a lump sum, as a regular income or as a guaranteed income. A guaranteed income assures you an interest rate based on actuarial calculations. You can also choose a combination of lump sum and regular income.

Can I change my decision about how to receive my savings?

Yes. Once any of the contingencies for liquidating your pension plan arise, you can redeem a partial amount or the total amount. If you retire, you can start redeeming it whenever you want, or even choose not to redeem it and save it until you need it, during which time you won't pay any tax on it. For example, you can choose to receive an income every month to supplement your state pension, and increase the amount later on, or reduce it, stop it and then start it again. If you have chosen to redeem a partial amount in the form of a lump sum, later on you can request another partial or total redemption in the form of an income. In other words, you have complete flexibility.

If the entire amount has not been received before you die, the beneficiaries you expressly designate in the plan can redeem it. If you have not designated any beneficiaries, by default they will receive it in successive order and in default of each other: first, your spouse, provided you were not legally separated; second, your children in equal parts; third, your parents; and fourth, your legal heirs.

Is there a limit to the contributions I can make to individual pension plans in a year?

Yes, the annual maximum is €1,500. The maximum tax reduction will be the lesser between this limit and 30% of the sum of net earnings from employment and economic activities for the year.

Can I hold several plans at once?

Yes.  You can hold plans at different financial institutions, and you can also distribute your assets between plans with different investment and diversification policies. Plus, there is no incompatibility between different types of pension plans, so you can hold an individual pension plan as well as an employment plan promoted by the company you work for, or even a self-employed pension plan if that is your case.

Can I make transfers between pension plans?

You can make as many transfers as you want, free of charge and without any tax burden, both between pension plans at the same entity, and between pension plans at different financial institutions. The only exception to free mobility between plans and financial institutions applies to employment pension plans, which you cannot move if you are still employed by the promoter or if you have retired.

Can I bring my pension plans/EPSVs from another financial institution to Bankinter?

Yes, you can transfer your pension plans/EPSVs from other financial institutions to Bankinter, and vice versa. The law establishes a maximum period of five working days for this procedure.

Is it worth investing in a pension plan or EPSV if I am only a few years from retirement?

Even if you think it's too late to accumulate a significant amount for your retirement, the tax benefits of pension plans/EPSVs make them one of the most interesting investments for your savings.

Can I take out a pension plan if I've already retired?

The aim of a pension plan or EPSV is to save during your working life and redeem the amount accumulated when you retire. You could still take out a pension plan after you retire but in that case it is important to understand that you would only be able to redeem the plan in the case of dependency or death. In the case of death, the accumulated wealth would pass to the beneficiaries you designate to receive them after you die.  Another aspect to bear in mind is that pension plan contributions can be deducted from your income tax base, but this is not the case with EPSVs.