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Is there a contribution limit for the Flexible Group Retirement Plan?

The maximum contribution depends on the limit of the total remuneration that can be allocated as remuneration in kind and may never exceed €99,999 per year. Wages in kind may not exceed 30 % of the worker’s wages and may not result in a reduction of the full amount of the minimum wage.

It’s important to note that, in most parts of Spain, contributions to group retirement plans with flexible remuneration do not count towards contribution limits for voluntary pension products (pension plans, insured pension plans and company pension plans), thus allowing workers to optimise their remuneration and retirement planning by using both types of instruments. 

What happens if the employee needs to redeem his or her Flexible Group Retirement Plan due to an exceptional liquidity situation (unemployment/long-term illness)?

Employees will be able to draw on the group insurance balance if they meet one of the exceptional liquidity requirements and provide the necessary documentation in proof thereof. 

How can an employee collect benefits from a group retirement plan (GRP)?

The forms of payment and recognition of the right to receive benefits from the group retirement plan owing to the aforementioned contingencies, may be:

  • Benefit as a capital sum, in the form of a lump-sum payment. A beneficiary may receive only one benefit under this plan in relation to any one contingency.
  • Benefit in the form of an annuity, and only for retirement contingencies. This consists of the receipt of two or more successive payments at regular intervals, including at least one payment each year of a constant or variable amount.
  • Mixed benefits combining annuities of any type with a capital sum payment, as stipulated in the preceding paragraphs. 
How are contributions to a group retirement plan taxed?

For the company, the contributions it makes as policyholder on behalf of its employees (insured individuals) are not deductible for corporate income tax purposes until benefits are paid.

For employees, contributions will not be included in their personal income taxable base, thereby reducing the withholding rate and deferring taxation until benefits are paid. 

How are benefits in a group pension plan (GPP) taxed?

The benefit received by the employee is taxed as employment income for personal income tax, and in the event of death the beneficiary/s will be liable for inheritance and gift tax. 

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BanSabadell Seguros Generales, Sociedad Anónima de Seguros y Reaseguros, holder of Tax ID No. A-64194590, with registered office at Calle Isabel Colbrand 22, 28050 Madrid. Registered in the Madrid Companies Register and in the Insurance Entities Register of the Directorate-General of Insurance and Pension Funds (DGSFP) under code C-0767.

BanSabadell Vida, Sociedad Anónima de Seguros y Reaseguros, holder of Tax ID No. A08371908, with registered office at Calle Isabel Colbrand, n.º 22, 28050, Madrid. Registered in the Madrid Companies Register and in the Insurance Entities Register of the Directorate-General of Insurance and Pension Funds (DGSFP) under code C-0557. 

BanSabadell Pensiones E.G.F.P., S.A., holder of Tax ID No. A58581331, with registered office at Calle Isabel Colbrand, 22, 28050 Madrid. Registered in the Madrid Companies Register and in the Insurance Entities Register of the Directorate-General of Insurance and Pension Funds (DGSFP) under code G-0085.

BanSabadell Mediación, Operador de Banca-Seguros Vinculado del Grupo Banco Sabadell, S.A., holder of Tax ID No. A-03424223, with registered office at Avenida Óscar Esplá, 37, 03007 in Alicante, and registered in the Alicante Companies Register and in the Administrative Register of Insurance and Reinsurance Distributors of the Directorate-General of Insurance and Pension Funds (DGSFP) under code OV-0004, having taken out a liability insurance policy pursuant to prevailing regulations on private insurance and reinsurance distribution.