Regulation of state and supplementary pension schemes in Spain: overview

A Q&A guide to pensions law in Spain.

The Q&A gives a high level overview of the key practical issues including: state pensions; supplementary pensions; funding and solvency requirements; tax on pensions; business transfers; participation in pension schemes; and employer insolvency and overall scheme solvency.

The Q&A is part of the Multi-jurisdictional Guide to Pensions law. For a full list of jurisdictional Q&As visit www.practicallaw.com/pensions-mjg.

Íñigo Sagardoy de Simón, Sagardoy Abogados
Contents

Pensions

State pensions

1. Do employers and/or employees make pension contributions to the government in your jurisdiction?

Contributions paid to the government

Employers and employees do not make direct pension contributions to the state. Funds are applied to the state pension out of the general social security contributions.

Taxation of contributions

Not applicable. (see above, Contributions paid to the government).

Monthly amount of the government pension

Not applicable (see above, Contributions paid to the government).

 

Supplementary pensions

2. Is it common (or compulsory) for employers to provide access, or contribute, to supplementary pension schemes for their employees? If they do, are they:
  • Occupational (that is, linked to an employment or professional relationship between the plan member and the entity that establishes the plan)?

  • Personal (that is, not linked to an employment relationship, established and administered directly by a pension fund or a financial institution acting as pension provider, where individuals independently purchase and select material aspects of the arrangements, though the employer may make contributions).

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
3. Where supplementary schemes are provided, do these schemes provide pensions, the value of which:
  • Is linked to the employee's salary (defined benefit)?

  • Is linked to employer and/or employee contributions and investment return on those contributions (defined contribution)?

Linked to the employee's salary

It is not compulsory for employees to join or contribute to private pension schemes. However, such schemes are common and are usually approved for tax purposes (see below). There are two types of scheme available:

  • Occupational scheme. This is set up under a trust and administered by the employer.

  • Personal pension scheme. This is set up and administered by a third-party pension provider (such as an insurance company).

The two schemes are often combined and marketed as the employer's group personal pension plan. However, they remain personal arrangements between the employee and the administrator.

The value of the pensions is usually linked to the employee's final salary, and cannot therefore usually be specified at the start of the arrangement.

Both employees and employers can contribute to these schemes.

Linked to employer and/or employee contributions

This depends on the rules contained within each private pension scheme (see above, Linked to the employee's salary).

 
4. For supplementary pensions:
  • Is there a minimum period of service before workers are entitled to receive vested rights?

  • Are there any legal requirements for schemes or providers to index pensions in payment and/or revalue pension rights in deferment?

Minimum period of service

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Legal requirement to index

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 

Funding and solvency requirements

5. In relation to supplementary schemes, are these generally funded or unfunded? If funded, are there any solvency requirements on the sponsoring employer or provider?

Funded or unfunded?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Solvency requirements for funded schemes

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
6. In relation to access for members to the funds in their supplementary pension scheme:
  • To what extent can members transfer their funds to another pension scheme?

  • How do members normally take the benefit of their funds (for example, lump sums, income withdrawals (drawdown), life annuity arrangements)?

  • What are the legal restrictions upon access to the funds (for example, age)?

  • What are the common arrangements for early retirement and ill-health retirement?

  • Are dependants of deceased members entitled to receive benefits payable on the member's death? What form do these commonly take?

Member's transfer of funds

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Taking pension benefits

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Legal restrictions

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Early and ill-health retirement

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

Dependants' benefits

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
7. Is there a regulatory body that oversees the operation of supplementary pension schemes? Do any other governance regimes apply to supplementary pension schemes?

Regulatory body

There is no single regulatory body that oversees the operation of supplementary pension schemes. One of the main regulations is the Order of 31 May 1971 for the Local Authority Mutuality, which regulates payment of the complementary fee to the Forecast National Mutuality of the Local Authority for its members' pensions.

Regulatory framework

See above, Regulatory body.

 

Tax on pensions

8. Are any tax reliefs available on contributions to supplementary pension schemes (by the employer and employees)?

Tax relief on employer contributions

Both employers and employees can contribute to these schemes. Subject to certain limits, employers' and employees' contributions to tax-approved private pension arrangements are tax deductible. Any growth in the value of assets held in an approved pension scheme is not subject to capital gains tax. Pension benefits (usually a fixed amount of money or monthly/yearly payments) are subject to income tax (this includes a withholding tax obligation on the scheme's administrator). Some employees (typically senior employees) participate in unapproved private pension arrangements in addition to an approved private pension scheme.

Tax relief on employee contributions

See above, Tax relief on employer contributions.

 
9. Are there any approval or registration requirements with the local tax authority where a supplementary scheme is established?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
10. What is the tax treatment of investments made by the scheme?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
11. What is the tax treatment of pension and lump sum payments made to members?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 
12. Are there any other applicable tax charges on schemes?

There is no answer content for this Question, as it is a new addition to the template that did not exist at the time of writing.

 

Business transfers

13. Is there any legal protection of employees' pension rights on a business transfer?

Automatic transfer of pension rights

The new employer must assume the social security rights and duties granted by the transferring employer to the transferred employees, including pension commitments and any kind of complementary social protection duty acquired by the transferring employer (Section 44 of the Workers' Statute).

Other protection for pension rights

See above, Automatic transfer of pension rights.

 

Participation in pension schemes

14. Can the following participate in a pension scheme established by a parent company in your jurisdiction:
  • Employees who are working abroad?

  • Employees of a foreign subsidiary company?

Employees working abroad

Employees working abroad can participate in a pension scheme established by a parent company in Spain.

Employees of a foreign subsidiary company

Employees of a foreign subsidiary company can participate in a pension scheme established by a parent company in Spain.

 

Employer insolvency and overall scheme solvency

15. Is there any protection provided for pension scheme benefits where the sponsoring employer becomes insolvent? If so, who provides the protection, and how does this operate? If the scheme itself is underfunded, are there any funding obligations on connected or associated legal entities?

There is no protection provided for pension scheme benefits where the sponsoring employer becomes insolvent.

 

Online resources

Social Security website

W www.seg-social.es

Description. This is the official website of the Spanish Social Security. This website is updated daily and contains official information regarding employment conditions as well as many other labour related issues.

Employment Ministry website

W www.empleo.gob.es

Description. This is the official website of the Employment Ministry. The website is updated daily and contains information regarding social security, employment, immigration, health and safety and employment inspection. The language of the website can be changed to English.

Public Employment System

W www.sepe.es

Description. This is the official website of the public employment system containing information on pensions, benefits and employment statistics.



Contributor profiles

Íñigo Sagardoy de Simón, Chairman

Sagardoy Abogados

T +34 91 542 90 40
F +34 91 542 72 82
E is@sagardoy.com
W www.sagardoy.com

Professional qualifications. Lawyer, Spain, 1992

Areas of practice. Employment and labour law.

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