the most unexpected announcement that affected pensioners

In 2023, the average asset size individual pension plans in Spain amounted to 11,573 euros, which represents an increase of 7% compared to 2022. This increase comes in the context of 7.34 million accounts, indicating that more than 15% of Spaniards have this type of account for retirement savings. According to a report from Invercaud Observatorythe total savings accumulated in these plans amount to almost 85 billion euros, individual plans most prominent, followed by employment plans and partners.

Beginning in January 2025, participants will be able to redeem contributions and earnings from their pension plans that are more than 10 years old. He economist Gonzalo Bernardos warns that this change will allow for the introduction of large quantities liquidity in the marketsand expects a significant portion of these funds to be channeled into the real estate sector. In particular, many families are expected to use these savings to help their children purchase their own home. This modification in regulation of pension plans and funds

could change the dynamics of savings and investment in the country in the coming years.

Changes to pension plans in 2025

From 2025, pension plan owners in Spain will be able to redeem your contributions without the need for justificationprovided that more than ten years have passed since your contribution. The measure is part of a 2014 reform aimed at increasing the liquidity of these savings products and responding to the need to offer more flexibility to savers.

The change will affect almost 64,000 people who will be able to withdraw their money in 2025, more than half total assets in pension plans. The only condition for salvation is that contributions must be made before 2015; Thus, each year the new year’s contributions will be reimbursed along with their accumulated income.

Pension plans will be bailed out starting in 2025 without having to go to court special circumstancessuch as retirement, disability or long-term unemployment. Beneficiaries must simply contact the management organization and request a refund of their investment.

From a tax point of view, rescue treatment It will be the same as upon retirement: it will be considered income from work and taxed according to the personal income tax scale. This means that the money redeemed will be added to the holder’s annual income, taxed at the applicable marginal tax rate.

There are several options save the capital: in the form of capital, where the entire amount is received at once, or in the form of income, which allows the money to be collected in monthly, quarterly or semi-annual installments. There is also a hybrid option, which combines both options, as well as a life annuity, where you agree to receive a fixed amount for your entire life.

It is extremely important to consider fiscal effect before deciding to save your pension plan. Generally, withdrawing money before retirement may result in a higher tax rate because earnings during your working life typically exceed retirement earnings. Additionally, we must evaluate the opportunity cost, which is what is lost by keeping money in a retirement plan instead of investing it in better options.

The new provision will not only facilitate the rescue of funds, but will also establish applicable commission limitsaiming to improve the profitability of these products for investors. Maximum fees have been reduced for fixed income and blended funds, which could make pension plans more attractive.

Taxation

taxation of pension plans in Spain It is governed by six sections of personal income tax. These brackets determine the applicable tax rate, which ranges from 19% for incomes up to €12,450 to 47% for incomes exceeding €300,001. Intermediate tax rates are 24% for incomes from 12,451 to 20,200 euros, 30% for incomes from 20,201 to 35,200 euros, 37% for incomes from 35,201 to 60,000 euros and 45% for incomes from 60,001 to 300,000 Euro.

During save the pension plan

It is important to consider that the total amount of compensation consists of both contributions made and income received. In this sense, redemption can be carried out in various ways: in the form of capital, where all accumulated money is collected at once; in the form of income, receiving periodic payments; in a mixed modality, combining both options; or in the form of a provision allowing funds to be received at the request of the beneficiary without a specified frequency.

It should be noted that the amounts saved are considered “work productivity”which implies their integration into the general personal income tax tax base. On the other hand, in 2024, contributions made before December 31, 2006 may receive a 40% tax reduction if withdrawn as capital, subject to the deadlines required by current law.