Spanish Budget Increases Pension Contribution Limits

by Ulrika Lomas, Tax-News.com, Brussels

02 January 2002

The Spanish government has used next year's budget to give increased tax benefits for those contributing to pension plans. The new rules, which come into effect at the beginning of 2002, mean that citizens will be able to increase tax-deductible contributions to their pension plans. Whereas previously a person could only contribute a maximum 25% of net income to a plan or 40% if they were over 52, under the new system these limits will completely disappear.

However, absolute limits will be retained. Previously the absolute maximum contribution was 7,212.15 euros (Pta1.2m) per year which could increase by Pta100,000 for every year over the age of 52. The first limitation will remain the same but the second will double and increase to Pta3.8m per year for those over 64. Pensions plans in Spain have a much lower take up than other savings schemes like investment funds. At the end of September the number of Spanish pension plan holders was a little over 5.3 million people. At the end of last year just two per cent of retired Spaniards were benefiting from complementary pensions, compared for instance to 45% of the Danish.

Recommended