Workplace pension scheme contributions simulator

Find out how much you can contribute to your workplace pension scheme so that you can deduct up to €8,500 per year from your income tax return.

What are workplace pension schemes?

Workplace pension schemes are retirement savings products offered by a company for the benefit of its employees. These schemes are aimed at allowing employees to generate capital through regular contributions throughout their working life so they can then enjoy it once they retire.

How does a workplace pension scheme work?

A workplace pension scheme is designed and promoted by the company to encourage its employees to save for retirement.

Therefore, any employee who has worked for more than a month for the company can join the scheme.

For workers, the advantage is that the company is the one that makes the contributions, which can vary according to what has been agreed in the specifications of the pension scheme. In addition, employees can top up these company contributions by making individual contributions that will generate tax advantages for them by increasing the total limit of deductions in the personal income tax base.

The employee will then benefit from the accumulated savings, including contributions and other benefits. However, the total amount will only be available at the time of redeeming the pension scheme.

In the event that a worker changes jobs, the capital accumulated to date is not lost, but is collected when the worker retires or one of the exceptional situations for redemption occurs (disability, dependency or death). This capital can only be transferred to a different pension scheme in the specific cases indicated in the scheme's terms and conditions.

From the point of view of pension management, they are very similar to other individual pension schemes. The Santander Pensiones team is responsible for managing the scheme's portfolio in accordance with the investment policy defined for it.

How can I redeem a workplace pension scheme?

A workplace pension scheme can be redeemed once any of the established contingencies occur: retirement, disability, severe dependency, full dependency or death. Additionally, the terms and conditions of the workplace pension scheme may establish other forms of redemption.

There is a wide range of redemption options in the following contingency cases: the total amount can be redeemed in the form of capital, in the form of income or in the mixed form of capital and income.

What is the maximum contribution limit of a workplace pension scheme?

The total contribution limit per year is of €8,500, i,e., the sum of joint contributions between the employee and the company. If you do not make contributions to individual plans, this limit increases to €10,000.

To find out how much you can contribute individually as an employee to the workplace pension scheme, you must first find out the amount the company has contributed. If the company's contributions do not reach the annual limit of €8,500, you can contribute to the scheme based on specific coefficients:

How are workplace pension schemes taxed?

The life of a pension scheme can be divided into two stages:

The contributions stage entails tax benefits, since they are tax-deductible just like individual pension schemes. Company contributions are considered payment in kind in personal income tax, so they form part of the taxable base, although no taxes need to be paid on them. The worker's own contributions reduce the taxable base of personal income tax.

At the time of redemption, everything that has been saved (capital from contributions plus profits obtained) is taxed as income from work in personal income tax. The logic behind this is that this money corresponds to benefits that you have obtained through your work, but which you do not enjoy by paying them into your pension plan.

The way in which the amount redeemed is taxed in the Personal Income Tax depends on whether it is made through income, which allows the money saved to be enjoyed and spread out over time; in the form of capital, where all the savings are received in a single payment or in a mixed way, i.e., a combination of these two options.

Contributions made before 2007 have a 40% deduction benefit, provided they are redeemed in the form of capital.

Who can join a workplace pension scheme?

Any salaried worker with more than one month in the company, as long as their company promotes an employment plan, can be a participant. In fact, promotion must be done for all workers.

Since 2023, self-employed workers have a specific scheme to cover this. These are simplified workplace schemes for the self-employed.