Two years earlier, the government trimmed 75% of the tax benefits for individual retirement plans and gave companies more flexibility in their hiring requirements. This shift aimed to encourage employers to hire by reshaping the incentives around retirement savings and payroll burdens.
Employer retirement plans grew in popularity long ago, yet their numbers have declined as the cost burden on companies rose. A sixth edition of KPMG’s pension insights in Spain reported that only 28% of Spanish firms still offer this benefit to their staff. For the government, saving via these plans remains more accessible to younger workers with smaller incomes, and it is also financially advantageous for companies because the contributions are taxable. Consequently, two years ago the tax advantages for private pension plans were slashed by 75%, and corporate plans saw relaxed requirements to promote hiring. While the annual individual pension contribution cap was 8,000 euros through 2020, the Budget Law reduced it to 2,000 euros in 2021, leading to the disappearance of about 15,000 retirement plans.
When it comes to corporate pension plans, the annual cap can now reach 10,000 euros from the combined company and employee contributions, with commissions on these plans running about 1% lower than those for individual plans, translating to roughly 20% savings in the long term. Diego Valero notes that with new employment retirement plans, in addition to deductions, companies receive Social Security contribution bonuses. He adds, “Now that it is easier for them, we should see growth in the adoption of corporate pension plans.”
Implementing this product within a company, especially SMEs, is not always straightforward. The final agreement typically includes a framework for developing employment retirement plans, though it does not specify the exact steps. One possibility being explored, and already adopted in several countries, is to link the plan to a salary increase for the business. This approach helps counter inflation and wage pressure while preserving employee liquidity and avoiding additional company expenses. The construction sector has already pioneered this method through collective bargaining for its workers.
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Experts advocate promoting company pension plans as a preferred option to individual plans. A Bank of Spain study on ownership of these instruments suggests employees save up to 66% more using employment plans. Eva Valero explains, “If your goal is to save a specific amount, say 100 euros a month, the employment plan can be a solid choice.” With new rules, self-employed individuals are also covered by employment pension plans with annual contributions up to 5,750 euros. “The sooner the plans are set up, the sooner savings begin,” she adds.
Approaches to inheritance management
Saving enough is just the start; many seek ways to improve living standards and diversify income. The real estate market offers several avenues to stabilize fixed or variable income and supplement pension provisions based on personal circumstances. Guerrero explains, “After age 65, capital gains from the sale of primary residences may not need to be declared, improving liquidity and freeing up finances from other assets.”
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Reverse mortgage
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Bare ownership
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Real estate life income products
Reverse mortgages involve an insurer providing funds that increase the homeowner’s debt, with the homeowner retaining living rights in the home. When the owner passes away, heirs decide whether to settle the debt. Eva Valero notes this product has historically underperformed in Southern Europe due to inheritance priorities but has gained traction as a viable option in recent years. Satrústegui observes that demand could rise as new generations come into play. The general appeal depends on asset levels and succession plans.
Bare ownership involves selling the real estate asset while retaining the right to use it until death. It offers tax benefits that vary by autonomous community and the asset’s size. Suárez explains, “If it’s your habitual residence, capital gains may not translate into tax due; if it’s a second home, the same logic applies as long as the funds are converted into rent.”
Real estate life annual income presents another option: if these measures do not cover costs, a real estate life insurance contract can provide a monthly income in exchange for transferring ownership of the home. Amoedo calls this an ideal retirement product for those who truly need a steady income, while noting owners can be exempt from household expenses such as property taxes in some cases.