Tax deductions for GBPs and IPPs

Find out how to pay less tax on your savings.

Investment products are getting more extensive by the day, as a way to achieve a return on savings for retirement. The offer is constantly growing as is citizens' financial awareness. In this way, small savers have the option of establishing their own criteria and priorities when it comes to choosing the best product for them: while some choose instruments that generate higher returns, others prefer to choose an option that provides greater liquidity. The key is to be positioned at all times in investment options that are in line with the individual's risk profile.

However, the possibility of paying fewer taxes on savings has been positioned as one of the most attractive characteristics when it comes to making this decision. Although not all savings products offer this possibility, GBPs and IPPs have certain tax advantages that can be very beneficial. This article will explain how deductions for GBPs and IPPs work so you can start getting the most out of your savings.

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What are GBPs and IPPs?

Guaranteed benefit plans (GBP) and individual pension plans (IPP) are instruments specially designed for generating savings for retirement.

Guaranteed benefit plans are characterized by offering returns with guaranteed interest rates for a specific period of time. In this way, the beneficiary has the option of knowing in advance the returns the GBP will have generated when redeemed. In general terms, GBPs have limited liquidity since they can only be redeemed at retirement or when certain situations are demonstrated, such as long-term unemployment, disability, dependency, or serious illness, among others. From January 1, 2025, it will also be possible to request to redeem contributions paid at least ten years ago.

In any case, redemption can be in the form of a single payment, income or a combination of the previous two options. With regard to contributions, they are limited to 8,000 euros a year.

Individual pension plans have very similar characteristics to GBPs. The main difference between the two is that guaranteed benefit plans are integrated into an insurance policy, while pension plans are implemented within a pension fund.

On the other hand, guaranteed benefit plans must have guaranteed returns through actuarial techniques, whereas returns on pension plans are not guaranteed, except in the case of guaranteed plans, and depend on the evolution of the markets in which they invest.

Operating very similarly, GBPs are recommended for conservative investors, generally close to retirement, who prioritize preserving their capital over obtaining returns. Pension plans with a more dynamic profile can opt for high returns, which is suitable, for example, for people who are far off from retiring, that is, investors who can afford to take risks.

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Tax deductions for GBPs and IPPs

As already mentioned, both guaranteed benefit plans and individual pension plans offer attractive tax benefits. The amounts contributed annually to either of these savings products can be deducted from personal income tax, thus reducing the tax base and generating significant tax savings. For example, if you pay annual contributions of €4,000 to a GBP or IPP and have a marginal personal income tax rate of 24%, the tax saving would be €960 (24% of 4,000).

The maximum tax relief is the lesser of the following amounts: €8,000 or 30% of the income from work and/or economic activities. However, if the contribution exceeds the deduction limit, the excess amount can be transferred to personal income tax returns for the next five fiscal years.

Once it is time to redeem the GBP or IPP, the capital obtained is taxed as earned income, even in the event of death: beneficiaries would not pay inheritance tax, but only personal income tax, and can do so in the future.

Do you not yet know how to get the most out of your savings for retirement? At BBVA, we can help you. Go to and find out about our savings products. You will find detailed information here on the individual pension plans and guaranteed benefit plans that we offer our customers. We also offer a wide variety of investment instruments so you can choose the product that best meets your needs and objectives.

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