Self-employed people may deduct up to €5,750 per year in pension plans

The government is taking another step so that the Public Employment Pension Fund becomes a reality and comes into operation before June 2022, as it committed with Brussels. Thus, the Council of Ministers approved, on Tuesday, a draft law regulating this new system of public protection, which aspires to be a new savings tool for retirement, however, it will have to return to the Council for a second reading before addressing it. in Congress.

Its aim is to emulate the system recently implemented in the UK so successfully that most workers have a pension employment scheme, something which is now a practical exception, as only one in ten does so.

The great novelty that it offers is that it is expanding this savings tool to the self-employed, a group that it has not yet been able to reach, who will be able to benefit next year from tax breaks of up to 5,750 euros, as well as civil servants. This was explained by the Minister of Social Security, José Luis Escriva, at the subsequent press conference, who stressed that this royal decree aims to “strengthen and facilitate the many wage-earners, the self-employed and even public servants who have not yet done so. Access to a product such as employment schemes Collective, a cheap savings product, which until now was only available in large companies.” This is another key to this superfinance: achieving more advantageous conditions to make the product affordable and really cheap compared to individual plans, which are expensive,” said the Minister .

simplifying procedures

For this, the state stands as the promoter of a publicly promoted Employment Pension Fund which will be managed by some of the directors who will be selected through a “competitive process,” according to the minister. The assets of these funds will be invested exclusively for the benefit of the participants and beneficiaries, taking into account the profitability, risks and social impact of the investments, as specified in the Regulations. In addition, to facilitate transparency and portability between pension plans, a common digital platform will be launched in which each participant can easily refer to all information and perform actions in a simple way.

Escrivá also stressed that this royal decree aimed to remove “all obstacles” to the collective schemes, which were governed by a highly intensive series of actions that included as many as seven steps to creating a plan. However, when it takes effect, it will be reduced to one.

The reform will be accompanied by an amendment to the tax incentives for these products to focus these benefits on employment plans at the expense of individuals. In this sense, this year the government approved a tax break for individual retirement plans, lowering the maximum that can benefit from the deductions from 8000 euros to 2000 euros. And from 2022, this figure will be further reduced and will reach 1,500 euros. On the contrary, the maximum contributions to employment plans will rise to 8,500 euros from next year.

For their part, when this public fund comes into force, self-employed workers can also be hired and deducted on their income statement with a maximum amount of 4,250 euros, which is much less than salaried employees. In this way, together with 1,500 euros of bonus for individual plans, the combined group limit will increase to 5,750 euros per year.

The employers’ union showed its refusal to agree to the bill on Tuesday and contradicted Escrivá, asserting that it was done “through his back to the social dialogue”. This was denounced by ATA President and CEOE Vice President, Lorenzo Amor, who lamented that the social dialogue table had not been negotiated. He pointed out that “a preliminary text, some allegations and suggestions were submitted, and there has not been a response yet.”

After being approved by the Cabinet in the first round, the bill goes to the media process and public hearing to receive contributions from civil society, and will subsequently be sent to the Economic and Social Council. After this procedure, it will be passed to the Cabinet again for submission to Parliament for approval before the second half of 2022, as agreed in the recovery plan.