The countdown has started. As of January 1, 2025, participants in individual pension plans will be able to redeem the money, all or part, that they have accumulated “just because.” In life; It will not be necessary to retire, have a work disability, live in a situation of great or severe dependency, suffer from a serious illness or be long-term unemployed. It will be enough to express the willingness to rescue the financial institution in which the pension plan is contracted. Of course, there are some conditions that are worth knowing. It is only possible to recover the amount resulting from adding the contributions that were made until December 31, 2015 (therefore, at least 10 years old) to the possible returns generated by them, if any. Starting in 2026, it will be possible to take into account what was contributed until December 31, 2016 (plus its income) and so on, successively over time, as the contributions reach the 10-year mark.
If the participant already initially plans to redeem all or part of his/her pension plan/plans, it is, according to experts, important, in the months that remain to be able to make that decision effective, to develop an appropriate fiscal strategy in this regard. The reason is simple: The Treasury will also be a beneficiary of this operation. In their eyes, the capital of pension plans should be considered as a return on work (a kind of salary) which, of course, must be included in the taxable base of income tax (IRPF). The taxes to be paid will be higher or lower—the entities will make the corresponding withholdings—depending precisely on that tax base (sum of the taxpayer’s total income). With current tax rates, they can represent, in general except in particular cases, between 19% and up to more than 50% of what is rescued. It is also true that the fiscal impact will be more or less relevant if the rescue is made in the form of income or capital (basically for its total annual amount) and whether or not other additional income has been received.
Given the developments and particularities that, regarding bailouts in the form of capital under the assumption “just because”, have occurred in recent months, technicians focus on clarifying what are the fundamental aspects to take into account in this sense to minimize the shock tax. Each of the points indicated refers to the general regulations, so, in this area, it is relevant to comply with the special tax regulations of some autonomous communities such as the Basque Country or Navarra.
1. There is no maximum annual amount in the reimbursement of pension plans based on age of participation, which allows them to be used as they reach that age.
2. If the amount (consolidated rights) for contributions made between January 1, 2007 and 12-31-2014 is recovered in the form of capital, the corresponding taxes are paid for the entire amount.
3. If the accumulated amount from contributions made before January 1, 2007 is recovered in the form of capital, the participant has the right to apply a 40% reduction on said amounts. In principle, for example, if the amount recovered amounts to 50,000 euros, you will only include 60% of it in your income, that is, 30,000 euros. Taking into account only these two details, in principle, technicians recommend “mixed bailouts” to soften taxation: recovering in the form of capital the amounts obtained from contributions prior to 2007 and, in the form of periodic income, the subsequent ones. That “in principle” has to do with the most recent developments regarding the aforementioned 40% reduction and which, in the opinion of experts, should also be considered.
4. Until recently, according to the General Directorate of Taxes, it was only possible, if you had two or more pension plans, to apply the 40% reduction on what was collected in a single year and with respect to the same contingency (retirement, unemployment, illness…). Well, the Central Economic Administrative Court (TEAC) has annulled this interpretation and currently it is already possible to apply this discount to the amounts received for the rescue of several pension plans in the form of a single capital, both in the year in which produce the contingency as in the following two exercises. Without a doubt, according to the technicians, this makes it possible to lighten the tax burden by being able to distribute this charge over up to three consecutive years, benefiting from the 40% discount. They go even further and point out that, if the participant were the owner of a single pension plan, they could resort to transfers to have more pension plans and thus fully use this option.
5. It is possible to apply the 40% reduction on the amounts generated by shares subscribed before 2007 due to different contingencies. That is, participants can, for example, redeem a part of their pension plan in the form of capital with 40% due to serious illness and, later, upon reaching retirement age, they can use this discount again as it is two different situations.
6. If part of a pension plan is redeemed thanks to this new liquidity assumption, it is, however, possible to continue making contributions to these products for other future contingencies (retirement, disability, death…).
According to the latest figures from the Association of Collective Investment Institutions (Inverco), the volume of assets of the set of Pension Plans (Individual System, Employment and Associated) was around 114,000 million euros at the end of 2023. Of that amount, more than half, some 64,000 million euros, expires 10 years in 2025 and, therefore, can be withdrawn only with the saver’s will.
Regarding returns, the latest data corresponding to February 2024 on the pension plans of the individual system show that the most profitable over a period of 20 years have been those that make up the variable income category with an average annual return of 5 .8%. Mixed variable income pension plans follow with 3.3%. Short-term fixed income, with 0.7%, closes the classification. After 15 years, the differences between them are increasing: while equities have generated positive results of 9.8% on average, short-term fixed income has placed them at 0.6%. At 10 years, variable income plans add 8.7% annually while short fixed income plans obtain losses of 0.2%.