If a Spaniard starts saving in a pension plan with the current fiscal framework approved by the government as part of the pension reform and contributes to the maximum exemption from the IRPF – up to €1,500 per year as of 2022 – he will get five times less return than the time to save their savings than it was before the reform. This comes as a result of a hands-on exercise conducted by the Institute of Economic Studies (IEE) on the impact of the tax incentive cuts implemented by the government in the past two years on the portfolios of savers with individual pension plans. The executive has implemented two reductions, in the 2021 and 2022 budgets to the maximum deduction for contributions to individual plans in the past two years, from €8,500 to €1,500 per year. In other words, this personal income tax tax incentive to contribute to a savings plan is today 5.6 times lower as a result of the reform, and its effect is expected to be offset by an increase of up to €8,500 in employment incentives for pension plans. However, not deploying this second savings pillar into the company and lowering incentives in individual plans reduced contributions to these tools by more than 40% in 2021 alone and by 58% if we compare them to numbers from 15 years ago. The main reason for this drop in contributions is that pension plans are no longer attractive. Added to the reduction in tax incentives is the processing of contributions and refunds in the face of the IRS, which in practice can lead to double taxation – in the case of a contribution above the exempted maximum -, although officially a tax-exempt system is applied to the initial contribution, Exemption on contributions of up to 1,500 euros per year, and taxes at the time of redemption of savings. POSSIBLE LOSS Returning to previous figures, if the saver contributes the maximum deduction of 1,500 euros for 35 years, he will net 110,500 euros at the end of the period, a figure that would be less than the 238,800 euros on average that would bring savings in the EU. If you contribute the maximum annual deduction. In regions with greater incentives to save, such as Ireland, this amount will rise to 660 thousand euros. If these savings are redeemed in the form of an annuity for life, proportional to the amount over 20 years, the Spanish pensioner will receive about 464 euros per month as a supplement to his pension. 60% less than what the average saver in Europe will receive, which will increase the amount to 1166 euros per month during these two decades. Mobile Desktop Icon Image, Subwoofer and App Mobile Code AMP Code 2450 APP In other words, a Spaniard will have a monthly income of 2.5 times less than a European income that consistently contributes to his savings plan for a maximum of 35 years tax-free. In addition, this amount is far from countries that have a more favorable legal framework for the accumulation of savings such as France (2,722 euros), Ireland (2,546 euros) or Cyprus (1989 euros). Significant reduction Now, if this same saver had started the path of their contributions to a 35-year horizon individual pension plan with the previous fiscal framework upon entry into the current coalition government, which set a maximum annual contribution income tax exemption of €8,500 per year, the final return would be higher Exponentially. Specifically, it is more than 500% higher, which brings the monthly income that will be received during the two decades of saving the plan to 2,598 euros. As long as this saver deposits €8,500 each year into the retirement plan. Gregorio Izquierdo, Director General of the Renewable Energy Institute, explains that “at a time when there is very high inflation, the savings policy could have helped to reduce the inflationary trend,” stressing in this regard that “the problem is that we are very far from the average And what we have to do is go back to the model we had in Spain until three years ago, because it was working fine.” RELATED NEWS Standard Social Security If Escriva decreed commissions capped at 0.4% for new work pension plans Gonzalo D. Changes that Led to this actuarial scenario for pension plan savers, the president of the IEE, ñigo Fernández de Mesa, asserts that “on the subject of pensions, the government must prepare a framework that ensures the sustainability of pensions, which is what the European Commission is asking us.” Savings must be increased in order to supplement the future of public pensions. “We should bet on a mixed model,” says the IEE chief, emphasizing that they will demand improvements from the executive branch.
