Redemption of a pension plan due to unemployment

We explain how to redeem a pension plan in the event of becoming unemployed
The redemption of a pension plan, meaning the moment when the customer can recover all their contributed capital as well as any returns that it may have generated, usually occurs upon retirement, this being the main reason why these savings vehicles exist. However, the law provides for other contingencies and exceptional liquidity circumstances under which a pension plan can be redeemed in advance.
Upper Banner Calculate Retirement Upper Banner Calculate Retirement
Save for your retirement
Calculate how your retirement would improve with contributions to a pension plan
Among these contingencies are situations of severe illness, disability, dependency, death, eviction from one's primary residence and, as a new contingency, the ability to request the withdrawal of contributions made at least 10 years prior (in any case, made before January 1, 2015). But moreover, following the reform of Royal Decree 304/2004, pension plan customers have the right to recover their consolidated rights if they are in a situation of long-term unemployment. Let's look at the characteristics of this kind of redemption in detail.

Requirements for redeeming a pension plan due to unemployment

In order to access the money accumulated in a pension plan, three requirements must be met:

  • Be legally unemployed.
  • Be registered as a job-seeker.
  • Have exhausted all unemployment benefits at your contribution level or not be entitled to these benefits.

Among self-employed workers, you must have exhausted your rights to receive unemployment benefits and must be registered as a job-seeker.

Moreover, those affected by a Collective Dismissal Proceeding – known as an ERE in Spanish - can redeem their pension plan regardless of their age.

Central Banner Pension Plan Central Banner Pension Plan
Pension plans adapted to your needs
See the options we offer:

How can you redeem a pension plan?

Once the unemployed person provides all the necessary documentation and meets the requirements, they can choose to redeem their pension plan in the usual way, in any of the following forms:

  • As capital: all the money is received, plus any interest accrued in a single payment.
  • As income: the customer will periodically – it can be monthly, quarterly, half-yearly or annually – receive a set sum of money, according to the number of years chosen for the redemption of the accumulated rights.
  • Mixed: this combines a redemption in the form of capital and a redemption in the form of income.
  • As a flexible payment: The beneficiary freely chooses the dates and amounts of the withdrawals, without any set frequency.

It should be remembered that when redeeming a pension plan, those incomes are taxed as employment income, so the amount received increases the taxable income base when calculating the Personal Income Tax payment.

CTA Pension Simulator CTA Pension Simulator
Pension Plans - You might also be interested in Pension Plans - You might also be interested in

You might also be interested in

  • These are the changes made in 2018 involving pensions and the maximum amount payable during retirement.
  • We are going to explain how you can calculate the pension benefits you will receive after retiring.
  • Several factors can affect the personal income tax withholding for retirement pensions. Determine your percentage.
Pension Plans - Tools Pension Plans - Tools

Pension plan tools

  • How much state pension will you receive when you retire? Find out in three simple steps.
  • Find the pension plan that best suits your savings needs and start planning your future.
  • Our comparison tool will enable you to know the characteristics of all our plans and choose the one that best suits you.
  • With our calculator, you can find out the final benefit you will receive when you retire.
  • Would you like to know how much you can save on your annual tax return if you contribute to a pension fund?