Employment pension plans receive a strong boost with the publication of Law 12/2022, of June 30. This regulation amends the revised text of the Pension Plans and Funds Regulation Law. Approved by RDL 1/2022, of November 29.
The aim of this regulation is to promote the strengthening of complementary social welfare of a professional nature. Based on the development of occupational pension plans. With strong anchorage in the sectorial collective negotiation, facilitating the access to groups that find it difficult to have access to them.
It should be remembered that an occupational pension plan is one promoted by the company for its employees, who are its beneficiaries. Thus, the promoter will be the company, corporation, company or entity. All employees who have an employment relationship with the company may voluntarily join the plan.
Boosting employment pension plans 2022
The main objective of the regulation is to encourage the existence of publicly promoted occupational pension funds. With an adequate dimension to guarantee lower investment costs and allow a diversified investment distribution. All this, in order to improve profitability levels.
Characteristics of occupational pension plans
The new regulations establish that the pension funds promoted by the Ministry of Inclusion, Social Security and Migration through the Promotion and Monitoring Commission created for this purpose will be considered as open public employment pension funds (FPEPP). These funds will fall into the category of employment pension funds.
These public pension plans are mainly intended to generate savings to supplement the income from the public Social Security pension in retirement. Pension plans are a complementary instrument and never a substitute for the public pension system.
Through this macro public pension fund, the Executive seeks to promote the use of company pension plans, formally called “employment pension plans”, a complementary system to the public pension that is practically not used in our country, where individual pension plans are much more widespread.
These are pension plans, but regulated by the government and compatible with private pension plans.
The Government’s macro pension fund will be made up of different publicly promoted employment funds. The Executive will select fund managers through a public tender, with a series of requirements, such as low commissions. And it will allow them to compete among themselves, seeking to offer the best conditions. With this formula, the aim is to make a supplement to future pensions available to a greater number of Spaniards…
Contribution limit and personal income tax deduction of contributions
Perhaps the most interesting aspect of this regulation is the taxation of pension plans. Law 12/2020 has modified the limit for personal income tax deductions and contributions to social welfare systems.
Personal income tax (IRPF) deductions for self-employed workers
In tax matters, a new contribution and deduction limit is incorporated for self-employed workers for contributions to Simplified Employment Pension Plans. This new limit also applies to own contributions made by the individual entrepreneur or professional to employment pension plans of which he/she is a promoter and also a participant. As well as contributions/contributions made to corporate social welfare plans or collective dependency insurance of which he/she is both the policyholder and the insured.
The total of the contributions up to the lesser of the following amounts:
- 750 per year
- or 30% of his net income from work and economic activities.
Personal income tax (IRPF) deductions for employed persons
The joint limit, for all the social welfare instruments, remains at €1,500 per year.
An additional limit has been introduced. The joint limit of €1,500 per year would be increased in the following cases and amounts:
- €500 per year. Provided that the increase comes from company contributions. Or from employee contributions to the same social welfare instrument for an amount equal to or less than the result of applying the corresponding coefficients to the respective company contribution:
- Equal to or less than €500.00 to 2.5%.
- Between €500.01 and €1,000 at 2%.
- Between 1.000,01€ and 1.500€ at 1,5%.
- More than 1.500€ at 1%.
The coefficient of 1% will be applied directly when the employee obtains from the company making the contribution, full income from work in excess of €60,000 in the year.
Exemption from Social Security contributions. This Law includes that as from January 1, 2023, employer contributions to pension plans will be excluded from the Social Security contribution bases. With the limit set out below:
“… the amount resulting from multiplying by thirteen the contribution resulting from applying to the minimum daily contribution base of group 8 of the General Social Security System for common contingencies, the general contribution rate payable by the company for the coverage of common contingencies.”
The resulting amount will be approximately €119.30 per month, about €1,430 per year.
Employment pension plans in the Corporate Income Tax
A new deduction is established for the companies in the integral quota of the Corporate Income Tax (IS). This deduction consists of 10% of the imputed company contributions in favor of employees with gross annual remuneration of less than 27,000 euros. In order to be able to apply this deduction, the contributions must be made to employment pension plans or other alternative social welfare instruments.
For workers with gross annual remuneration of more than €27,000. The deduction will be applied on the proportional part of the company contributions corresponding to the first €27,000 gross annual salary.