Request to redeem Pension Plans and EPSVs due to COVID-19

At BBVA, we can help reduce the impact of coronavirus

Royal Decree 463/2020 contains exceptional liquidity conditions, for both pension plans and EPSVs, as a result of the situation created by COVID-19.
If you have one of these pension products at BBVA and you meet the conditions, you can cash them in early.

Pension plans

In accordance with Royal Decree-Law 11/2020 of April 1 (supplemented by Art. 23 of Royal Decree-Law 15/2020 of April 21), participants in pension plans who are affected by the economic situation resulting from the health crisis can exercise their vested benefits in the following cases:

  • Employees who are legally unemployed due to being furloughed.
  • Business owners who have been forced to close their establishment.
  • Self-employed workers who have been forced to stop their activity.
As long as these situations (unemployment, closure or stoppage) are due to the health crisis caused by the COVID-19.

What period does this new exceptional event cover?

This case is intended to cover the participant's income reduction associated with their work or economic activity during the state of emergency (started on March 14, 2020) and up to one month after its completion (date that is currently unknown). The limit of the amount that can be redeemed is explained in detail below.

When can the request be made?

  • Since the start of the state of emergency (March 14, 2020).
  • Up to six months later (September 14, 2020).

When are the vested benefits paid?

The payments will be made within seven business days from the date on which the participant files all the supporting documentation detailed below.

What tax implications does this new exceptional liquidity event have?

As with all other contingencies and exceptional liquidity events, the amounts paid in this new event will be subject to the same tax regime as pension plan benefits.

Important information for customers

The payment in the form of a lump sum, pursuant to Royal Decree-Law 11/2020 of March 31, which adopts urgent complementary social and economic measures to deal with COVID-19, and to the existing administrative doctrine for similar cases, the 40% tax reduction (if entitled to it) can only be applied once. This reduction cannot be applied again in subsequent redemptions for the same exceptional liquidity event.

EPSVs

The Resolution of March 25, 2020, of the Director of Financial Policy of the Basque Government, authorizes Voluntary Pension Entities (EPSV) with defined contribution plans that are entitled to an unemployment benefit, to pay benefits to those account holders who are affected by a furlough or layoff as a result of the healthcare crisis caused by COVID-19, even if the requirements laid out in the EPSV Law and the EPSV Regulation are not met.

Which holders can request this new exceptional liquidity event?

  • Employees who are legally unemployed due to being laid off or furloughed.
  • Self-employed workers who have sustained losses or stopped their activity.

As long as these situations (unemployment, closure or stoppage of activity) are due to the health crisis caused by COVID-19.

What is the period covered by this new exceptional event?

  • From the day on which the holder is affected by the layoff or furlough.
  • Until the date on which the layoffs or furlough end.

When are the vested benefits paid?

The payments will be made within five business days from the date on which the holder presents all the supporting documentation detailed below.

What tax implications does this new exceptional liquidity event have?

As with all other contingencies and exceptional liquidity events, the amounts collected in this new event will be subject to the same tax regime as EPSV benefits.

The vested rights in the affected products may be redeemed at the participant's request when any of the contingencies or exceptional liquidity cases exist.

If you are affected by one of the situations described and are interested in requesting a redemption, please contact your adviser, who will make the necessary arrangements.

Pension Plan Benefits

In order to receive the allowance during the state of emergency resulting from the COVID-19 crisis, the participant must prove they are eligible to receive it by providing the following documentation:

1. Employees

Documentation:

  • Copy of the applicant's national ID document (both sides).
  • Application properly filled out and signed by the participant, indicating the participant's account to be credited.
  • Justification from the company certifying that the participant has been furloughed as a result of the health crisis caused by COVID-19 (it must specify the conditions of the furlough, whether it is a temporary suspension of employment or reduced work hours, specifying in the latter case the percentage of the reduction).

If the participant can't provide this document, they can replace it with an affidavit that includes an express justification for the reasons, related to the consequences of the COVID-19 crisis, that prevent them from presenting said document (form in Annex I). Once the state of emergency is over, the applicant will have one month to provide the document; if this is not done, the managing company reserves the right to cancel the payments made.

  • Last full pay stub before becoming unemployed.

Payment frequency and method:

  • Each payment will be made at the participant's express request.
  • The participant may not file more than one application per month:
    • For the first application, the participant will be allowed to redeem the salaries (subject to the limits indicated in the following section) that they stopped receiving in the month or months since the start of the state of emergency (March 14, 2020) and until the date of this first request.
    • In the second and subsequent applications, the ones for the month or months not covered by previously paid applications will be used.
  • The participant cannot request amounts corresponding to the net salary that has accrued after the day that marks the one-month point after the state of emergency is lifted.

Amounts receivable:

  • The amount requested by the participant will be paid, as long as it is not higher than the limit described below. If the amount requested is greater than the limit, the amount paid will be equal to this limit.
  • Limit = the lesser of the following amounts:
    • Net salary not received in the month or months since the start of the state of emergency (March 14, 2020) until the application date, and not covered by previously paid applications; or 
    • 3 times the IPREM for that month or months (€1,645.80 per month).

Maximum calculation of months equal to the duration of the state of emergency plus an additional month.

  • If the participant decides to redeem several pension plans, the limit will be applied to the total amount to be received for all the plans that they intend to redeem.
  • Under no circumstances can the amount payable exceed the participant's vested benefits in the pension plan.
  • The amount to be paid will be subject in all cases to the tax regime in place for pension plan benefits.
  • Under no circumstances can the amount payable exceed the participant's vested benefits in the pension plan.
  • The amount to be paid will be subject in all cases to the tax regime in place for pension plan benefits.
2. Self-employed

Documentation:

  • Copy of the applicant's national ID document (both sides).
  • Application properly filled out and signed by the participant, indicating the participant's account to be credited.
  • Stoppage of activity:
    • Certificate issued by the AEAT or by the competent body of the Autonomous Community on the statement of work inactivity declared by the applicant.
    • Notification or decision from Social Security or the corresponding collaborating mutual society approving the payment to the participant of the extraordinary benefit due to stoppage of activity, as regulated in Article 17 of Royal Decree-Law 8/2020 of March 17.
  • Reduction in turnover of at least 75%:
    • Notification or decision issued by Social Security or the corresponding collaborating mutual society approving the payment to the participant of the extraordinary benefit due to reduced turnover, as regulated in Article 17 of Royal Decree-Law 8/2020 of March 17.

If the participant can't provide this document, they can replace it with an affidavit that includes an express justification for the reasons, related to the consequences of the COVID-19 crisis, that prevent them from presenting said document (form in Annex III). Once the state of emergency is lifted, the applicant will have one month to provide the certificate; if this is not done, the managing company reserves the right to cancel the payments made.

  • Last annual tax return available (Form 100) and, where applicable, the partial payment of Personal Income Tax (Forms 130 or 131) or VAT self-assessment for the last quarter (Form 303).
  • Affidavit quantifying the monthly amount of income reduction (form in Appendix IV).

Payment frequency and method:

  • Each payment will be made at the participant's express request.
  • The participant may not file more than one application per month:
    • For the first application, the participant will be allowed to redeem the estimated net income (subject to the limits indicated in the following section) that they stopped receiving in the month or months since the start of the state of emergency (March 14, 2020) and until the date of this first request.
    • In the second and subsequent applications, the ones for the month or months not covered by previously paid applications will be used.
  • The participant may not request amounts corresponding to the net income they estimate they would have received after the day that marks the one-month point after the state of emergency is lifted.

Amounts receivable

  • The amount requested by the participant will be paid, as long as it is not higher than the limit described below. If the amount requested is greater than the limit, the amount paid will be equal to this limit.
  • Limit = the lesser of the following amounts:
    • Estimated net income not received in the month or months since the start of the state of emergency (March 14, 2020) until the application date, and not covered by previously paid applications; or
    • 3 times the IPREM for that month or months (€1,645.80 per month).

Maximum calculation of months equal to the duration of the state of emergency plus an additional month.

How the estimated net monthly income is calculated:

- Form 100 Personal Income Tax return (annual): the amount of the settlement basis subject to tax (box 500/505) will be used as a reference and then divided by 12 months.

- Form 130 partial payment of Personal Income Tax (quarterly): the amount for net income (box 03) will be used as a reference and then divided by 3 months.

- Form 131 partial payment of Personal Income Tax (quarterly): the amount for net income (box 01) will be used as a reference and then divided by 3 months.

- Form 303 VAT self-assessment (quarterly): the sum of boxes 01-04-07-10-13 and 16 will be used as a reference and divided by 3 months.

- Affidavit: the amount of the estimated net monthly income declared by the participant.

In the event of a discrepancy between the tax return and the affidavit, the tax return will prevail; within tax returns, those from the last quarter will prevail over those from the last fiscal year.

Note: the affidavit is requested in practice because the law requires it

  • If the participant decides to redeem several pension plans, the limit will be applied to the total amount to be received for all the plans that they intend to redeem.
  • Under no circumstances can the amount payable exceed the vested benefits.

3. Owner of a business establishment

Documentation:

  • Copy of the applicant's national ID document (both sides).
  • Application properly filled out and signed by the participant, indicating the participant's account to be credited.
  • Affidavit from the business owner, justifying the reason for not opening their establishment to the public as a result of the stipulations contained in Article 10 of Royal Decree 463/2020 of March 14, as well as the reduction in the monthly income (form in Annex II).
  • Last annual tax return available (Form 100) and, where applicable, the partial payment of Personal Income Tax (Forms 130 or 131) or VAT self-assessment for the last quarter (Form 303).

Payment frequency and method:

  • Each payment will be made at the participant's express request.
  • The participant may not file more than one application per month:
    • For the first application, the participant will be allowed to redeem the estimated net income (subject to the limits indicated in the following section) that they stopped receiving in the month or months since the start of the state of emergency (March 14, 2020) and until the date of this first request.
    • In the second and subsequent applications, the ones for the month or months not covered by previously paid applications will be used.
  • The participant may not request amounts corresponding to the net income they estimate they would have received after the day that marks the one-month point after the state of emergency is lifted.

Amounts receivable:

  • The amount requested by the participant will be paid, as long as it is not higher than the limit described below. If the amount requested is greater than the limit, the amount paid will be equal to this limit.
  • Limit = the lesser of the following amounts:
    • Estimated net income not received in the month or months since the start of the state of emergency (March 14, 2020) until the application date, and not covered by previously paid applications; or
    • 3 times the IPREM for that month or months (€1,645.80 per month).

Maximum calculation of months equal to the duration of the state of emergency plus an additional month.

How the estimated net monthly income is calculated:

- Form 100 Personal Income Tax return (annual): the amount of the settlement basis subject to tax (box 500/505) will be used as a reference and then divided by 12 months.

- Form 130 partial payment of Personal Income Tax (quarterly): the amount for net income (box 03) will be used as a reference and then divided by 3 months.

- Form 131 partial payment of Personal Income Tax (quarterly): the amount for net income (box 01) will be used as a reference and then divided by 3 months.

- Form 303 VAT self-assessment (quarterly): the sum of boxes 01-04-07-10-13 and 16 will be used as a reference and divided by 3 months.

- Affidavit: the amount of the estimated net monthly income declared by the participant.

In the event of a discrepancy between the tax return and the affidavit, the tax return will prevail; within tax returns, those from the last quarter will prevail over those from the last fiscal year.

Note: the affidavit is requested in practice because the law requires it.

  • If the participant decides to redeem several pension plans, the limit will be applied to the total amount to be received for all the plans that they intend to redeem.
  • Under no circumstances can the amount payable exceed the participant's vested benefits in the pension plan.
  • The amount to be paid will be subject in all cases to the tax regime in place for pension plan benefits.

EPSV benefits due to layoffs

1. Employees:

Documentation:

  • Copy of the applicant's national ID document (both sides).
  • Application properly filled out and signed by the holder, indicating the holder's account to be credited.
  • Document proving that the applicant is affected by temporary or permanent layoffs resulting from the exceptional situation caused by the COVID-19 health crisis.
  • Proof of payment of unemployment benefits from the Spanish Public Employment Service (SEPE).
  • Last full pay stub before becoming unemployed.

Frequency and amounts receivable:

  • The holder has to certify, every month for as long as they are unemployed, that they are indeed unemployed by presenting the document specified earlier.
  • If furloughed:
    • It will consist of a monthly income.
    • The income will be equal to the difference between 100% of the regulatory base used to calculate the unemployment benefit and the percentage of the regulatory base that the worker receives as a result of the furlough.

(That is, the regulation seeks to ensure that the holder receives a total of 100% of the unemployment benefit paid by the SEPE and the unemployment benefit obtained from the EPSV.)

  • If laid off:
    • It will consist of a monthly income.
    • Subject to the same conditions as the unemployment benefit regulated in the EPSV Law and Regulation.

2. Self-employed workers:

Documentation:

  • Copy of the applicant's national ID document (both sides).
  • Application properly filled out and signed by the holder, indicating the holder's account to be credited.
  • Document certifying that the activity was stopped as a result of the exceptional situation caused by the COVID-19 health crisis.
  • Document certifying eligibility to receive unemployment benefits.
  • Last annual tax return available (Form 100) and, where applicable, the partial payment of Personal Income Tax (Forms 130 or 131) or VAT self-assessment for the last quarter (Form 303).
Frequency and amounts receivable:
  • The holder has to certify, every month for as long as they are unemployed, that they are indeed unemployed by presenting the document specified earlier.
  • Same as in the case of furloughed employees.