Company pension plans: know the latest trends and tax and legal news
To guarantee a sufficient pension for future generations, urgent measures must be implemented, in particular in these times when the sustainability of the Spanish pension system remains in question. In this sense, Mercer experts insist on the urgency for the government to take measures to promote supplementary retirement plans in companies and, above all, that they be automatically respected by employees.
Everything indicates that the government would lay the groundwork for the announced Retirement Superfund to start operating in the second half of the year, and by the end of the year it may already have accumulated funds. The question is what are the incentives and measures that the state will implement to help create these complementary plans. The possibilities range from reaching consensus in collective bargaining to semi-compulsory secondment, as would be the case in countries like the UK or Poland.
“All these measures and the government’s proposals in recent months should aim to ensure the financial viability of the system in the medium and long term, to maintain purchasing power, to preserve its role of protection against poverty and to guarantee equity. intergenerational ”, explains Miguel Ángel Menéndez, director of the social protection area of Mercer Spain.
Tax and legal news in company pension plans
The company spoke out in favor of the State’s promotion of better financial education for citizens to promote savings habits. Among the latest tax and legal developments, the contribution ceiling to the pension scheme has been reduced to a maximum of 2,000 euros to apply the reduction in the personal income tax base. However, this limit will be 8,000 euros as long as the increase is greater than 2,000 euros and comes from contributions from companies. In addition, the ceiling for the reduction in contributions in favor of the spouse decreases from 2,500 to 1,000 euros.
“Regarding tax rates, there is a two point increase in the general tax base for income over € 300,000, with an increase in the marginal rate from 45% to 47%. There is also a three point increase in the tax base of savings of € 200,000, with an increase from 23% to 26% ”, explains Juan Luis Alonso, senior lawyer at Mercer Social Security.
Regarding the news of retirement and pensions, this year, the retirement age is postponed to 66 years for those who have worked less than 37 years and three months. In the event of retirement at 65, you must have contributed 37 years and three months or more. Also, the parameters for calculating the amount of the pension have been modified taking into account the last 24 years of contributions, immediately before the month preceding retirement, and they will be reassessed by 0.9%, the equivalent of the estimated CPI. for this year 2021.
As a government proposal and as part of the Recovery, Transformation and Resilience Plan: Work and Pensions Reforms, up to nine reforms that directly affect pensions are included:
Funding of inappropriate expenditures to deal mainly with the aging of the population following the retirement of the baby boom generation. Maintain the purchasing power of pensions. The government is proposing to rethink the revaluation mechanism which guarantees the maintenance of the purchasing power of pensions through a formula that links it to the CPI. Align the effective age with the legal retirement age with changes in the system for reducing early retirement coefficients. Adapt contribution careers to the reality of work with the possibility of choosing the years to be integrated into the regulatory base. Replace the sustainability factor with an “intergenerational equity” mechanism. The executive proposes the introduction of a new instrument under which the fundamental parameters of the system will be periodically reviewed according to the evolution of demography and the balance between the employed population and the retired population. New system of social security contributions for the self-employed for their real income, possibility of choosing the contribution base. Modification of the maternity pension supplement making it possible to identify which of the two parents was most affected in their contributory career by the birth of each child. Promotion of supplementary pension systems. Promotion of employment pension plans by creating a public fund to promote free choice. Gradual adaptation of the maximum contribution basis of the system so as not to penalize the contributory system.