“It is not advisable to accumulate a lot of income”

The traditional saversthose who are more attached to banking products that are safer but offer lower profitability, such as bank depositsthey usually have in their personal portfolio a pension plan to be able to have a better financial capacity when the time for retirement arrives.

“A pension plan is a long-term savings and investment product designed for retirement. It consists of making periodic or specific contributions that are invested according to the criteria established by the plan. The money contributed and the profitability obtained can be redeemed in regulated cases,” explains Caixabank on your website.

In this sense, there is a widespread belief that by contracting pension plans you do not have to pay taxes, although nothing could be further from the truth: The money you contribute is deducted from your income tax return, but later you will have to report to the Treasury when the time for rescue arrives.

Currently, The annual limit of contributions to individual pension plans in Spain is 1,500 euros -or 30% of the net income from work-, which can be increased if contributions from collective or business plans are combined as long as they do not exceed 12,000 euros.

A very common mistake that many savers tend to make is to rescue the pension plan, that is: recover the contributions made over the years plus the interest generated, in one go and shortly after retiring. “The higher your annual net income, The higher the marginal rate you will have to pay in his statement. Hence, it is not advisable to accumulate a lot of income in the same year,” warns the Organization of Consumers and Users (OCU).

This group remembers that the money received for the rescue of the pension plan “will have to be added to the rest of their income (from the last payrolls of that year, from a collective savings insurance from their former company…), which will necessarily imply paying more taxes in personal income tax since the applicable rate will be higher.” It must be specified that due to the rescue of the plan We pay taxes on the general personal income tax base as earned income. and at a rate that, on the state scale, will range between 19% and 47%.

“Accumulating a lot of income is a bad tax decision”

As an example, a citizen with a declared income of 25,000 euros per year with 80,000 euros in his pension plan serves as an example. If you decide to redeem the accumulated money in one go, Your tax base will rise to 105,000 euros, which will cause you to go from paying taxes from 30% to 45%.

“Accumulating a lot of income in the same year is a bad fiscal decision,” insists the OCU. Therefore, “It is preferable to wait at least until the year after retirement to collect them”, and sometimes, depending on the rest of the income we have, “to collect them distributed in the form of income over many years”.

Because this last rescue option is usually more beneficial. Taking the previous example as a reference, suppose that the beneficiary of the pension plan agrees to receive 1,000 euros per month from your plan instead of all at once. In this way, you should only add 12,000 euros to your general tax base of 25,000 euros, so it would finally amount to 37,000 euros and you would be taxed at 37%, up to eight points less.

The exceptional nature of plans prior to 2007

However, the consumer organization does advise withdrawing the funds at once – in the form of capital – if they come from plans with contributions prior to 2007, since “a reduction of 40% for the part corresponding to the contributions made“.

This way, if, for example, you recover 80,000 euros, only 48,000 euros will be added to personal income tax. This 40% reduction can only be applied in the same year in which the contingency occurs or in the following two years.

Contingencies in pension plans are specific events that allow the saved funds to be rescued and, in addition to retirement, include incapacity for work, severe dependency or great dependency, death, long-term unemployment and when prove at least 10 years of seniority in contributions

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