What do you do if your pension plan is embargoed?

We will explain under which circumstances your pension plan can be repossessed and how to deal with it

As a general rule, a seizure is associated with checking accounts or real estate. However, what happens if someone with no income has a pension plan? Can a pension plan be seized? The answer is yes, but there are several nuances.

A pension plan is a long-term private saving mechanism designed to complement the Social Security retirement pension. Under this definition, it is understood that the funds in a pension plan cannot be redeemed until the payee's retirement. However, there are a series of contingencies that enable you to access these funds before retirement:

  • Disability.
  • Dependency.
  • Long-term unemployment.
  • Severe illness.
  • Death.
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Regulation of Plans and Pensions

Having covered the special circumstances for redeeming pension plan funds, it is important to understand what happens to funds in an active pension plan. The Regulations on Plans and Pensions state that while the money remains invested it cannot be seized or subjected to any other judicial or administrative restraint. Therefore, provided we do not take out and spend the funds, the money invested in the pension plan can continue to increase in value and earn returns.

In this regard, the provisions of the Regulations on Plans and Pensions are beneficial to people in difficult, but not critical, financial situations. If a person is in financial difficulty, but is able to maintain the funds in their pension plan untouched, they have the possibility of generating returns and increasing the balance that they can benefit from when they retire or under one of the contingencies that allows the funds to be redeemed before that date.

However, when we are dealing with investments and the law, nothing is ever black or white. The gray area of being able to seize a pension plan is related to the aforementioned regulations which state that “the consolidated rights of the pension plan participant shall not be subject to seizure, or judicial or administrative restraint, until the moment at which the right to the loan is authorized or they become available (...), according to contributions made prior to at least the last ten years”.

Circumstances in which a pension plan can be seized

The amendment to the Regulations on Plans and Pensions detailed in the corresponding Spanish Official State Gazette (BOE), opens the door to a series of possibilities for seizing pension plan.

While the condition of the invested funds as untouchable money remains in effect, if a seizure order is issued due to the insolvency of the pension plan participant, the bank takes the following actions: when the managing entity receives the order to seize, it makes an annotation of the court order, which means that if, for example, in 15 or 20 years the participant is about to be paid the funds from the pension plan, they can be seized at that moment. This will always be carried out through a court or administrative order and the bank or another entity or natural or legal person will never be able to give instructions for the seizure.

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However, the special contingencies for accessing funds and the latest amendment to the regulations open up another course of action so that banks do not have to wait as long before legally issuing a seizure order. If the plan participant is in a legal situation of long-term unemployment or is unable to work due to severe illness, the bank, always through the corresponding court order, can seize the plan if the payee decides to redeem it voluntarily, taking advantage of one of the special contingencies.

Regarding the ten-year time frame, it is important to note that the amendment to the Decree came into force in January 2015. As it specifies that the funds that can be accessed must have existed for ten years, it is understood that these measures would begin to apply in 2025. However, to date, neither the Act nor the Regulations cover this specific course of action for this circumstance.

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With the collaboration of the BBVA PENSIONS Institute:
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