How is PPI refund paid?

Pension recovery

A pension plan is a long-term savings instrument with two different types of taxation. On the one hand there is the taxation corresponding to the contributions made, which entails tax benefits. On the other hand, there is the taxation of the redemption of the pension plan, which is different.

The taxation of the redemption of a pension plan is basically the opposite process to that of the contributions. When a pension plan is surrendered, the funds obtained are considered as earned income and, as such, they increase the taxable base of the IRPF causing an increase in the taxes to be paid.

The large increase in taxes involved in redeeming the plan all at once, makes the option of redemption in the form of an annuity become relevant. Let us suppose that the beneficiary of the pension plan agrees to receive €1,000 per month from the funds available in his plan. In this way, he will only have to add €12,000 per year to his general taxable income.

To finish balancing the taxation of the redemption of a pension plan, it is necessary to take into account the reduction of 40% of the funds redeemed from the pension plan in the form of capital. In 2007 this reduction was eliminated, but a transition period was established allowing the reduction of the amounts contributed to the plan before January 1, 2007.

How much do I have to pay to the tax authorities for the redemption of a pension plan?

In other words, the redemption of the pension plan is taxed at a minimum rate of 19% and at a maximum rate of 45% when the income exceeds 60,000 euros per year.

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When can money be withdrawn from a pension plan?

The regulations allow you to recover the money in the plan after 10 years, which affects all the money you have contributed up to that date.The regulations allow you to redeem the money in the plan on December 31 of that date.

Where is the redemption of a pension plan put on the income statement?

In order to declare this reduction in Personal Income Tax, it must be completed in the section “reduction for irregular income” in the section “income from work”.

When I can cash my pension plan

The most common thing when contracting a pension plan is to think about how much you are going to save on your income tax return with your contributions. The reality is that pension plans pay taxes, and a lot of them compared to other products such as investment funds.

With a mutual fund, the way it is withdrawn has no influence on its taxation. With a pension plan the same does not happen and the difference can be thousands of euros in taxes. Moreover, choose wrongly how you recover your pension plan and you can squander the benefits of the best plan only in taxes.

Are you lost and don’t know how to do it? In these cases, the best option may be to turn to a financial advisor to help you with your finances and guide you on the best way to make your pension plan profitable.

If you want to get an idea of the tax withholding for surrendering a pension plan, you can use this surrender simulator, which will tell you how much tax you pay for surrendering the plan in the form of capital or in the form of income. The tool is very simple and in a few seconds you will know at a glance how much tax you will pay for recovering your retirement savings.

When can the money from Geroa be collected?

GEROA recognizes the right to benefits when the qualification of a provisional disability (6 months) is definitive, considering the same date of economic effects as the INSS, i.e. the date of the provisional disability.

What is box 465 of the 2020 income tax return?

465 Contributions and contributions for the year 2020. 466 Contributions for the 2020 fiscal year to group long-term care insurance.

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How to charge GEROA?

You can submit it by regular mail, fax, e-mail, at the company, the union or deliver it in person at the GEROA office, as indicated in the benefit application.

What happens if I stop paying into my pension plan?

The redemption of a pension plan must be done intelligently. The money received counts for the Treasury as earned income and, therefore, it counts for personal income tax purposes. It is for this reason that it is necessary to evaluate how to do it so that fiscally it is more advantageous.

When you have to make the income tax return for the year 2021 we must take into account the changes applied in the IRPF brackets. Specifically, a new personal income tax bracket of 47% has been added for incomes over 300,000 euros.

So, the question is obvious: what is the best way to redeem the pension plan? The answer depends on each taxpayer and his or her personal situation. Here we are going to review some casuistry. Let’s take a look.

How does GEROA pay taxes?

If you receive a lump-sum payment in GEROA, you can transfer the capital to another EPSV free of charge. 40% is exempt. The other 60% is computed as earned income, together with the rest of the salary or pension.

How does GEROA work?

GEROA is a non-profit organization. We do not charge commissions or distribute dividends, and the members of our governing bodies do not receive any remuneration, thus improving the profitability of savings. GEROA does not depend on any public body or financial institution.

What is Box 465?

Contributions to pension plans or other social welfare systems in 2020 will be included (or will appear included in the case of accessing the draft) in the section “Reductions in taxable income”, in the sub-section “Reduction for contributions to social welfare systems, in …

Taxation of pension plans

Are you lost and don’t know how to do it? In these cases, the best option may be to turn to a financial advisor to help you with your finances and guide you on the best way to make your pension plan profitable.

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One of the main characteristics and disadvantages of pension plans is that they are not a liquid product. In other words, the money cannot be withdrawn at any time. This is one of the tolls you pay for the tax advantages you have.

The pension plan is intended for long-term investments and more specifically for retirement. This does not mean that you cannot take the money out of the pension plan early, although there must be special circumstances to do so.

In case of total and permanent incapacity to work for the usual profession or absolute disability or great disability to carry out any type of work, it will be possible to recover the pension plan.

If you are wondering how to redeem the pension plan due to serious illness, it will be necessary to prove with a medical certificate from the Social Security or an authorized entity the physical or psychological condition that temporarily disables the development of the usual professional activity for a minimum period of 3 months and that requires a clinical intervention of major surgery in a hospital center. This category also includes physical or psychological ailments or injuries with permanent sequelae that partially limit or totally prevent the usual activity.