Last 10 February 2018, Spanish Royal Decree 62/2018 was published, amending the Regulation on instrumentation of company commitments with employees and beneficiaries in respect of pensions, approved by Spanish Royal Decree 1588/1999, and the Regulation on pension funds and plans approved by Spanish Royal Decree 304/2004. In light of this new Spanish Royal Decree 62/2018, maximum fund management commissions are adjusted downward, and in turn, the liquidity of this savings alternative is elevated, by allowing participants to withdraw, as of 2025, without limitation, contributions made at least ten years prior.
The new Spanish Royal Decree’s measures have already been in force since 11 February 2018, save application of the new limits for management and deposit commissions, which shall only enter in force within two months, meaning 11 April 2018, (sole final provision Spanish RD 62/2018).
The new changes entailed by this Spanish Royal Decree are summarised thus:
Reduction in commissions:
With the Spanish Royal Decree, regulation of management commissions is amended, leading to a general reduction in commissions. The maximum fixed rate that existed is replaced by a table of maximum values, depending on the types of pension funds and plans:
- For fixed-income funds, a maximum of 85%, which implies a decrease of 65 basic points, as opposed to the current limit.
- For mixed funds, a maximum of 3%, 20 basic points less.
- For variable income funds, a maximum of 5%.
In this way, the average commission is reduced from 1.50% to 1.25%.
Moreover, the maximum deposit commission is reduced from 0.25% to 0.2%.
Recovery of savings 10 years or older:
As of the year 2025, without limitations, contributions made, as well as profits generated, over the course of at least 10 years, may be recovered early from pension funds and plans. In other words, all contributions made before 2015 may be liquidated as of 2025, and for those made in 2016 and later years, the 10 pertinent years must pass.
This early recover is also applicable, under the same terms and conditions established in the complementary welfare systems, analogous to the pension plans set forth in article 51 of the Spanish Personal Income Tax Law (insured welfare plans, company social security plans and collective insurance with social security mutual insurance companies).
This Spanish Royal Decree opted not to establish additional conditioning factors or limitations on the availability of the vested rights, considering that this circumstance of liquidity, based on the age of the contributions, entails an incentive to hire these products, which may boost the development of complementary social security systems.
Other news:
The Spanish Royal Decree also updates regulation over pension fund investments, so as to update references made by the Regulation on pension plans and funds to other national and community financial standards in force. Thus, necessary references are added to Spanish Law 22/2014, dated 12 November, regulating capital-risk entities, other collective investment entities of the closed-end type, and companies that manage collective investment entities of the closed-end type; moreover, shareholding in European Venture Capital Funds (EVCF) and European Social Entrepreneurial Funds are expressly included as suitable assets for pension funds.
Amendments were also made in relation to the formal establishment of criteria to calculate the liquid value of shares in specifications in pension plans and funds
Lastly, of note is the amendment to Spanish Royal Decree 304/2004 on Pension Plans and Funds, to include stipulation of early collection of retirement benefits, in the event that the contributor, regardless of his or her age, terminates their employment relationship and falls under the legal unemployed status, in cases such as collective dismissal or dismissal for objective causes.
Arrabe Integra
Tax Department
