What is the maximum contribution to a pension plan

Find out the maximum amount you can contribute each year into a pension plan
Opening a pension plan can provide you with income to supplement your public retirement pension, while also providing you with significant tax advantages. Contributions made into a pension plan give you the right to a lower assessment base for your personal income tax (IRPF), which means that you will have lower tax payments for years in which you have made contributions. Even though at the time of the redemption you will have to pay tax on your money as earned income, you will have benefitted from a tax deferrment that can be taken advantage of by, for example, reinvesting the tax savings back into the plan each year.
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Calculate how your retirement would improve with contributions to a pension plan

Contributions to pension plans are limited both from the financial perspective and the taxation perspective. Thus, these contributions have a maximum limit of €8,000 yearly. From that contribution, you will be able to deduct the following amounts on your annual tax return:

- €8,000 yearly. For any taxpayer, regardless of age.

- 30% of the net income from work and other economic activities.

Additionally, those persons whose spouse does not obtain a net yield from work and/or whose economic activities bring in less than €8,000 yearly, will be able to contribute a maximum of €2,500 annually to the spouse's plan.

For persons with a disability (physical of 65% or more and psychic of 33% or more), the yearly maximum contribution limit rises to €24,250, including contributions from third parties, which cannot exceed of €10,000 a year.

Reduction of tax brackets and marginal rates for personal income tax (IRPF)

As mentioned above, making contributions into a pension plan will reduce your assessment base for personal income tax (IRPF). The tax brackets and marginal rates applied can be seen in the following table:
Amount  Withholding
Amount 
From €0 to €12,450
Withholding
19%
Amount 
From €12,450 to €20,200
Withholding
24%
Amount 
Between €20,200 and €35,200
Withholding
30%
Amount 
Between €35,200 and €60,000
Withholding
37%
Amount 
More than €60,000
Withholding
45%

When and how you can redeem a pension plan

In general, the contributions you make into a pension plan cannot be recovered until you become retired with the Social Security system. However, there are a series of contingencies that will allow you to gain early access to the capital deposited in your pension plan, prior to reaching your retirement age.

- Death of the account holder, which can generate rights of widowhood or orphanhood, or other rights in favor of heirs or designated persons.

- Full and permanent inability to work or serious disability, as defined in the Social Security system.

- Verified severe illness, which fully or partially limits the ability to work.

- Severe dependency or high dependency.

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- To be in long-term unemployment, registered as a job-seeker and not the recipient of unemployment benefits or these benefits have been exhausted.

- Situation of eviction from the primary residence.

Since January 1, 2015 there is the possibility to redeem consolidated rights for contributions that are at least 10 years old. In other words, it will be possible for investors to redeem the consolidated rights as of January 1, 2025 if they desire.

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