The self-employed can contribute up to 5,750 euros to pension plans from this year

2023-12-21 14:03:14

There are already 19 self-employed PPES registered with the General Directorate of Insurance and Pension Funds (DGSFP), and it is expected that their offer will continue to increase in the coming months, because the more than three million self-employed people in Spain can benefit from this new savings instrument.

The Pension Plans also offer an important fiscal advantage for those who subscribe to them due to the right to the reduction of the taxable base of the Personal Income Tax, since the contributions that the worker makes to his Plan (with maximum annual limits) are reduced of the year’s income, thus reducing taxation. Thanks to the PPES, the self-employed can make additional contributions to Plans up to a total limit of 5,750 euros per year, in order to deduct in personal income tax the total contributions up to the lesser of the amounts between 30% of their net returns of work and economic activities, or these 5,750 euros.

Discounts, before December 31

The following table calculates the tax relief that a self-employed worker can take advantage of, according to the contributions made to Pension Plans, according to the type of tax in force for income segments and amount contributed to Plans. As an example:

· A self-employed person who makes a contribution of 1,500 euros before the end of the year, and has an annual income of 20,000 euros, could reduce his tax bill for contribution to Plans by 360 euros. If this same self-employed person contributed the maximum deductible amount (5,750 euros), the reduction would reach 1,380 euros.

· If the self-employed person’s annual income were 40,000 euros per year, the relief corresponding to a contribution of 1,500 euros would be 555 euros and with the maximum contribution (5,750 euros), this tax saving would increase to 2,128 euros.

Long-term savings planning

In the following table, a simulation has been prepared to calculate the savings that a worker can accumulate on the basis of different contributions to different Plans, in the long term. For example, with the current average annual return on Pension Plans (3% in the long term).

· A worker who contributes 1,500 euros per year to an Individual Pension Plan (PPI) would obtain an amount of 40,306 in 20 years.

· In the case of a self-employed worker who saves 1,500 euros per year in PPI and another 1,000 euros in a PPES, for 20 years, he could accumulate a saving of 67,176 euros at the end of this period, an amount that can rise to 188,503 euros, if he maintains this same contribution for a period of 40 years.

· In the case of making the maximum contribution established by law in PPI and PPES, located at 5,750 euros, your savings at 20 years could be 154,505 euros, a figure that would increase to 433,557 euros if you maintain these same contributions for 40 years

The Pension Plans are a savings and investment formula designed to complement public retirement, where the contributions made are invested with the aim of obtaining a return, which makes it possible to enjoy additional income to the public pension . This savings instrument is relevant as it constitutes a fundamental tool to ensure an adequate standard of living during retirement. In a context where longevity is increasing and the pension system faces financial challenges, Pension Plans allow individuals to plan their financial future and ensure financial security in retirement.