Everything you need to know about the taxation of pension plans in 2025

The pension plans They continue to be, in 2025, one of the main long-term savings instruments in Spain, especially aimed at supplement the public pension retirement. Their main attraction lies in the tax advantages they offer, sinceand allow you to reduce the personal income tax tax base (Personal Income Tax), which translates into immediate savings in the income tax return.

However, its taxation has changed in recent years, especially after the reforms introduced by Law 31/2022 of General State Budgets for the year 2023, which have maintained the trend of limiting deductible contributions in individual plans and promoting collective or employment plans.

How do pension plans work?

In practice, pension plans function as a long-term piggy bank with tax benefits. The contributions made by the worker are subtracted from their general tax base, which reduces the amount on which personal income tax is calculated. This means that the higher the taxpayer’s marginal rate, the greater the tax advantage obtained.

For example, a person who pays taxes at 37% and contributes 1,500 euros to their pension plan will be able to save up to 555 euros in their tax return. Nevertheless, These contributions are not unlimited.since the law establishes annual caps that determine how much can be deducted.

What are the tax limits?

In 2025, the fiscal limits of pension plans remain at 1,500 euros per year for individual plans. This figure represents a notable reduction compared to the 8,000 euros that were allowed until 2020. However, the regulations allow this limit to be raised up to 10,000 euros per year if these are combined contributions between the worker and his company to employment plans.

In these cases, the additional contribution can reach 8,500 eurosprovided that comes from business contributions or contributions from the worker himself to the same plan, under the conditions established by law.

Savings for the self-employed

Taxation also contemplates specific treatment for self-employed workers. Starting in 2023, they are allowed to make additional contributions of up to 4,250 euros per year to simplified employment pension plans or those they themselves promote. This change seeks to balance the savings conditions for the disadvantaged group compared to employees with access to company plans.

In total, a self-employed person could contribute up to 5,750 euros (1,500 euros for an individual plan plus 4,250 euros for a simplified employment plan), with the same tax benefit as in traditional plans.

The increase in the tax burden

Now, the fiscal attractiveness of pension plans is concentrated at the time of savings, not at the time of rescue. When the participant collects his plan—whether in the form of capital or income—the amounts received are taxed as work performanceintegrating into the general income tax base.

This implies that the bailout can considerably increase the tax burden, especially if large amounts are perceived in a single exercise. For this reason, financial advisors recommend carefully planning the rescue to distribute it over several years or combine it with other sources of income, thus minimizing the tax impact.