Pension plans

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Everything you need to know

What is a private pension plan?

A private pension plan is a very common way to save money during a person´s working life. It works by depositing an amount of money periodically over a set amount of time to the pension fund; this money is invested according to the needs and desires of the plan´s owner. According to the type of pension plan chosen, the returns on invested money will be higher or lower and the risk associated with investment will also vary. This type of fund serves so that the beneficiary of the plan can receive income for certain periods of his or her life such as retirement, unemployment or disability. A private pension plan does not replace a public pension.

When could I collect a pension plan?

Generally, depending on the type of plan you have and in which country the plan was taken out, fund beneficiaries can collect money from the pension plan whenever they wish. The beneficiaries of the plan must meet certain conditions before they can collect any money from a plan; for example having reached a certain age, being unemployed or having some kind of disability. There are cases that beneficiaries of the fund can collect the money after the contributor has died.

What parties are involved in a private pension plan?

  • The promoter of the plan.
  • The person who is interested in creating a private pension plan.
  • The beneficiary / s of the plan (It could be the same person who created the plan or somebody totally different).

Are there any tax benefits in Spain related to pension plans?

Yes, the main tax benefits related to pension plans in Spain are the following:

  • The right to reduce the general part of the taxable income, within the limits set by law.
  • The deferral of taxation until the date of payment.
  • The link with the applicable tax in relation to the amounts actually perceived annually, as one may choose to receive the money as capital or income.

Who do the vested rights of a pension plan belong to?

When you take out a pension plan you can name the beneficiaries of the plan or those people who would have a right to the plan should you no longer be here to use it. If the owner of the pension plan does not name anyone in the initial pension plan contract, the beneficiaries would be those who have been designated in the will or appointed according to intestate law.

The information provided in this article is not intended to be legal advice but merely conveys information related to legal issues.



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