At the present time, any person wanting to
maintain their standard of life when retiring must
complement the State Pensions with additional
saving financial products. A Pension Plan can be a
good idea.
But, what is a Pension Plan? It is a type of retirement plan and in Spain, there
are two different groups; Company Pension Plans wherein an employer makes
contributions toward a pool of funds set aside for an employee’s future benefit.
The pool of funds is then invested on the employee’s behalf, allowing the
employee to receive benefits upon retirement, and, Private Pension Plans that
can be contracted individually by anyone and out of any Company control
wherein the person that has contracted it makes the contributions ‘’upon’’
towards ‘’his’’ their retirement benefit.
There are Pension Plans for each type of investor. The differences lie on the way
the Plan invests. There are fixed rate Plans (they invest in national debt or
companies), Variable rate Plans (they invest in funds, stocks, actions, etc),
Combined Plans (they combine both of the previous Plans criteria) and
Guaranteed Plans (they safeguard the invested capital).
We can contract one or several Pension Plans. However, it is essential that the
set, or “portfolio”, in which the Pension Plan is investing, matches with our
customers risk profile of investment.
The risk profile of an investor is defined by the investors attitude towards risk, in
short words, the investors risk tolerance. Thus, the categories of investors are
Conservative, Balanced and Enterprising.
The money invested in the Pension Plan (called consolidated rights) can be
surrendered at retirement, or before, in case of permanent disability. Also and as
provided in the Spanish Laws, the Pension Plan money can be surrendered
before retirement when the beneficiary has a long term unemployment situation,
suffers a severe disease or if evicted from his first residence or living home.
Also and from January the 1st of 2015, the Pension Plan money can be
surrendered after ten years from the first payment contribution.
What makes the Pension Plan so attractive are its tax benefits; the Pension Plan
is the only financial product that reduces the taxable income in the yearly tax
return. However, the taxable income reduction is limited to 8.000 euro Pension
Plan payment contribution per year.
Spanish Banks have different and many Pension Plan offers but to know if a
Pension Plan suits your needs, or, which Plan better fits with your tolerance to
risk profile, it is highly recommended to seek advice from your Financial and legal
adviser.
Our Lawyers are specialised in these and other investment related matters;
contact us for further information, we will be pleased to help.
Maria Navarro,
Lawyer and Barrister at Alicante Solicitors > Raymundo & Hopman.
Actio Legis 