Occupational Pension Plans
Planes de pensiones del sistema de empleo
Coverage
Voluntary participation
- The provider can be any entity, corporation, society or company. Participants are their employees.
- Pension plans are based on collective or individual agreements.
- The constitution of these plans is voluntary. However, if the collective agreement provides for employees to join the pension scheme directly, they shall be deemed to have joined the scheme unless they expressly state that they do not wish to be included in it.
- Discrimination in coverage is prohibited, but differences in the contribution and benefit structure for different categories of employees are allowed, provided that they are based on objective criteria.
Financing
General finances
- Fully funded pension plans implemented through financial and actuarial capitalisation systems.
Contribution payments
- Contributions can be shared between employer and employees.
- Defined benefit plans are usually solely funded by the employer.
- Defined contribution plans are usually funded by the employer and the employee. The employer bears most of the total cost of the plan and the employees pay the rest.
State support & incentivising strategies
- The contributions made by the company in the name and on behalf of the workers must be imputed as income from work and therefore are subject to social security contributions and personal income tax (IRPF).
- Contributions paid to the pension plans by the worker generate a right to apply for reductions in the Personal Income Tax subject to certain limits: annual contributions up to a maximum of EUR 8,000 or 30% of the sum of net income from work and economic activities for the year are deductible.
Administration
- Fund management companies must meet minimum capital requirements and must be authorised by the Ministry of Economy.
Qualifying Conditions
- The retirement age required by the corresponding social security scheme will apply (general scheme or a special scheme), whether it is the age for ordinary, early or deferred retirement.
- When a participant’s access to retirement in the corresponding social security scheme is not possible, the contingency will be understood to have occurred at 65 if the participant does not work and is not paying contributions for the contingency of retirement into any social security scheme.
- Pension plans may provide for the payment of the retirement benefit in the event that the participant, whatever their age, terminates their employment relationship and becomes legally unemployed.
Benefits
Pension payments
- Depend on the term of pension payment (lump sum payment, fixed-term or lifelong pension), the biometrical tables, and the technical interest rate (an interest rate derived from actuarial mathematics used to discount future benefits in order to determine their present value).
Taxation and social security contributions
- Pension benefits are taxed as income in the Income Tax Law.
- Pension payments are not subject to social security contributions.
Coverage
Financing
Administration
Qualifying Conditions
Benefits
Voluntary participation
- The provider can be any entity, corporation, society or company. Participants are their employees.
- Pension plans are based on collective or individual agreements.
- The constitution of these plans is voluntary. However, if the collective agreement provides for employees to join the pension scheme directly, they shall be deemed to have joined the scheme unless they expressly state that they do not wish to be included in it.
- Discrimination in coverage is prohibited, but differences in the contribution and benefit structure for different categories of employees are allowed, provided that they are based on objective criteria.
General finances
- Fully funded pension plans implemented through financial and actuarial capitalisation systems.
Contribution payments
- Contributions can be shared between employer and employees.
- Defined benefit plans are usually solely funded by the employer.
- Defined contribution plans are usually funded by the employer and the employee. The employer bears most of the total cost of the plan and the employees pay the rest.
State support & incentivising strategies
- The contributions made by the company in the name and on behalf of the workers must be imputed as income from work and therefore are subject to social security contributions and personal income tax (IRPF).
- Contributions paid to the pension plans by the worker generate a right to apply for reductions in the Personal Income Tax subject to certain limits: annual contributions up to a maximum of EUR 8,000 or 30% of the sum of net income from work and economic activities for the year are deductible.
- Fund management companies must meet minimum capital requirements and must be authorised by the Ministry of Economy.
- The retirement age required by the corresponding social security scheme will apply (general scheme or a special scheme), whether it is the age for ordinary, early or deferred retirement.
- When a participant’s access to retirement in the corresponding social security scheme is not possible, the contingency will be understood to have occurred at 65 if the participant does not work and is not paying contributions for the contingency of retirement into any social security scheme.
- Pension plans may provide for the payment of the retirement benefit in the event that the participant, whatever their age, terminates their employment relationship and becomes legally unemployed.
Pension payments
- Depend on the term of pension payment (lump sum payment, fixed-term or lifelong pension), the biometrical tables, and the technical interest rate (an interest rate derived from actuarial mathematics used to discount future benefits in order to determine their present value).
Taxation and social security contributions
- Pension benefits are taxed as income in the Income Tax Law.
- Pension payments are not subject to social security contributions.
Legal Basis: Royal Legislative Decree 1/2002 of 29 November approving the consolidated text of the Plans and Funds Regulation Act (Real Decreto Legislativo 1/2002, de 29 de noviembre, por el que se aprueba el texto refundido de la Ley de Regulación de los Planes y Fondos de Pensiones).