The Council of Ministers gave for the articulation of the public pension fund with which it is intended to give a definitive boost to complementary savings for retirement, one of the pending tasks of Spain if we raise the comparison to the rest of the countries of the community environment and, more there, it is a demand from Brussels for the reform of the public pension system.
Specifically, the bill has incorporated tax incentives to boost collective pension plans, in line with recommendation 16 of the Pact of Toledo and with the recommendations of the Independent Authority for Fiscal Responsibility (AIReF). It must be remembered that in the 2022 General State Budgets the process of differentiating taxation between individual and collective plans continues, establishing a limit on the deduction of the tax base of 1,500 euros and 10,500 euros, respectively. Of course, the text does not definitively include one of the demands of the private sector, which has transferred to the Executive until the last moment prior to approval and which was a condition to sustain public support for the measure: tax relief in the income tax. Societies.
It is expected, according to the calendar committed to the Commission, that these public promotion funds will be active for the second half of 2022. It will depend on this whether our country receives the tranche corresponding to the second semester of this year from the Next Generation funds, for value of 6,000 million euros.
For whom is the savings instrument intended?
The objective of the Government is to reach and group in these employment pension plans nearly 10 million workers in our country and to five-fold the base of money deposited in these instruments by workers, up to 300,000 million euros. Mainly, the three million self-employed workers in our country are the object of this reform, the nearly three million workers who are employed at some of the levels of public administration (according to the latest EPA data) and the workers of SMEs that they do not have access to these savings plans, which are highly concentrated in large corporations.
Will all Spanish employees have to save after the reform?
The law approved for the promotion of employment plans does not include any clear and clear element of obligation on the use of savings instruments. In the United Kingdom, the so-called autoenrollment was incorporated to promote these plans, which is an aspect of automation by which each worker who joins a company begins to contribute by default to this retirement plan. And it is the same employee who must expressly transfer his desire to leave the plan that the company has open for its workers. In the case of Spain, only one point is added that establishes the duty to negotiate (but not to agree) the complementary pension in the sectoral collective bargaining processes of companies. Furthermore, this point, by hanging from the law regulating pension funds and plans, lacks legal obligation, and according to the experts consulted by eE, it could have to be replicated in the Workers’ Statute if it is to be imposed as a duty for future negotiations.
What if my company decides to open a simplified plan for its workers?
First, workers will have the option to accept or reject the savings plan, as is the case with the current funds already regulated by law and promoted by the private sector. However, these plans will be open to the future by a decision agreed upon in collective bargaining by employers and unions, and in which there will also be representation designated by the Ministry of Inclusion, Social Security and Migrations, for which reason with conditions accepted by all parties.
What will my contributions be like? How much money will I allocate?
In the event that the worker decides to join the new savings system, he will begin to allocate money from his payroll to the pension fund. An agreement will come out of the collective negotiation on the percentage of the payroll that is allocated to the plan (in the United Kingdom this contribution, which is mandatory, reaches 8% of the salary) and it will also be decided if the company makes complementary contributions to this fund, to accompany those made by the employee. In this way, the worker’s plan would be allocated each month the own amount and the amount contributed by the employer. From the private sector, it is demanded at this point that the State can also join these contributions. In the United Kingdom, 3% of these contributions are paid by the employer, 4% by the employee, and a 1% contribution by the State.
What benefits do I have when contributing to the public pension fund?
In the first place, the worker who begins to contribute to the public pension fund will be generating complementary savings for the public benefit that Social Security will grant him when leaving the labor market. Secondly, both the employee and the employer will be able to enjoy incentives if they contribute to the savings plan. It should be remembered that the Government could introduce future measures on the public system that cause a reduction in the initial amounts of the retirement pension. Without going any further, the extension from 25 years to 35 years of the quoted period for the calculation of the regulatory base
What tax incentives are there for contributing to the savings plan?
At the point of tax incentives that will be given for contributing to the employment plan, the offer can be divided into three parts, depending on the different recipients. On the one hand, the worker will be able to deduct up to 1,500 euros per year for contributing to these plans, as long as he is the only one who contributes to the fund. If the employer supplements these contributions, the amount to be deducted may reach 8,500 euros more. In addition, there are the incentives for the employer that have been substantiated in the approved text -they are the exempt limits for contributions that were specified in the General State Budget of 2022- that suppose a deduction in the Social Security contribution of up to 301 euros per year per worker. In the last draft, incentives were not included for the Corporate Tax that the private sector claimed as a gesture of approaching the measure. It should be remembered that until 2013, the employer’s contributions were also reduced by up to 10% of the tax for Companies.
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