Complementary pensions (Voluntary)
2018: Royal Decree 62/2018, of 9 February, which modifies the regulation on the instrumentation of the companies´ commitments for pensions with the workers and beneficiaries, approved by the Royal Decree 1588/1999, of 15 October, and the regulation of plans and Pension funds, approved by royal Decree 304/2004, of 20 February
2017: Law 27/2011, of 1 August, on updating, adequacy and modernisation of the Social Security System
2014: Royal Decree 681/2014, of 1th August, which modifies the regulation of plans and pension funds, approved by royal Decree 304/2004, of 20 February, the regulation on the instrumentation of the companies´ s commitments for pensions with the workers and beneficiaries, approved by Royal Decree 1588/1999, of 15 October.
2011: Act 2; of 4 March, amends Act 1/2002.
2009: Royal Decree 1299, amends Royal Decree 304/2004
2007: Royal Decree 1684 of 14 December; amends Royal Decree 304/2004.
Royal Decree 439 of 30 March, amends Royal Decree 304/2004
2006: Act 11; regulates cross-border activity of pension plans and funds.
2004: Royal Decree 304: approves the Pension Plans and Funds Regulation, incorporating all aspects of the European Union Regulation, especially Directive 2003/41/CE, except in relation to cross-border activity.
2002: Act 1; consolidates the Pension Plan and Pension Funds Law of 1987 and all its modifications; regulates the establishment of pension plans, pension funds and pension fund management entities; defines maximum contribution limits, regulates tax treatment and includes measures concerning protection of rights.
1999: Royal Decree on the implementation of employers' pension agreements with employees and beneficiaries; requires employers, based on the Insurance Law of 2004, to implement occupational pension agreements through group insurance contracts and/or the creation of a pension plan; restricts the establishment of book reserves to certain occupational pension agreements in the financial sector and provides for transitional arrangements for pre-existing plans.
Types of plans
Employment Pension plans: A Plan Control Commission must be established for each occupational pension plan, with members representing the sponsoring employer, employees and beneficiaries. At least half of the members of the commission must be employer representatives.
The Plan Control Commission:
- supervises the operation of the plan;
- appoints an actuary to review the plan;
- proposes changes to contribution rates on the basis of the actuarial review;
- decides through which pension fund the plan is to be implemented;
- nominates representatives to the pension Fund Control Commission;
- represents the plan's interests with the fund administrator appointed by the pension Fund Control Commission.
Pension plans must be implemented through pension funds, which are autonomous patrimonies without legal personality, established for the sole purpose of implementing pension plans. Pension funds may be established either as closed or open funds.
The establishment of a pension fund is subject to the approval of the Ministry of Economy and Finance - Insurance and Pension Fund Directorate - and pension funds must be registered with the Ministry. The statutes establishing the fund must be attached to the application for its approval and must regulate:
- the procedures for the election of members of the Fund Control Commission and the renewal of their mandates;
- the investment policy;
- the actuarial basis;
- the rules for winding up the fund.
A Fund Control Commission must be established for each pension fund. If a pension fund implements several occupational pension plans, its Control Commission must include employer, employee and beneficiary representatives selected proportionately from the Plan Control Commissions. Where a pension fund implements only one occupational pension plan, the Plan Control Commission also carries out the functions of the Fund Control Commission.
The Fund Control Commission:
- supervises the operation of the fund;
- appoints the fund administrator;
- appoints the custodian (see section Asset Management);
- decides on the admission of pension plans to the pension fund;
- defines the investment policy and supervises its implementation (this responsibility may be delegated to the fund administrator).
A pension fund must be managed by a fund administrator, which must be a pension fund management entity (or an authorized life insurance company. These are both subject to pension legislation with regard to employment pension plans. This Management Entity must be established as limited companies with the sole aim of managing pension fundsEGFPs and must comply with a minimum capital requirement, which depends on the pension fund assets managed.
Moreover, a pension fund management entity are responsible for external relationships with public administrative bodies (regulators, prudential, fiscal, etc), as well as members and third parties.
The fund administrator is responsible for the overall management of the pension fund, including the benefit and contribution administration. Fund administrators must be authorized by the Directorate General for Insurance and Pension Funds and registered in the special register of pension fund management entities. In order to obtain a licence, fund administrators must fulfil specified requirements with regard to fitness and propriety, internal organization, minimum capital, etc.
Discrimination in coverage is prohibited but differences in the contribution and benefit structure are permitted for different categories of employees, provided that they are based on objective criteria. Plans may be divided into sub-plans to provide for different categories of employees.
Sources of funds
Other sources of funds
Methods of financing
Acquisition and maintenance of rights
Preservation, portability, transferability
Benefit qualifying conditions
Benefit structure / formula
All plans: Plan assets must be placed in a Pension Fund approved by the Ministry of Economy. The assets of the Fund are deposited and controlled on behalf of plan beneficiaries and members by a custodian entity appointed by the Pension Fund control commission and are therefore completely separate from the assets of any sponsoring employer or association. The management company appointed by the Pension Fund control commission to administer and invest the Fund's assets must be a registered pension fund management entity (specialist company legally domiciled in Spain) or an insurance company authorised to provide life insurance.
In relation to prudential requirements applicable to pension funds management companies that are treated as IORPs, the Spanish legal framework establishes the following rules for the calculation of the required solvency margin that are provided in article 21 of Real Decree 304/2004, of 20 February, by which approves the regulation of plans and funds of pensions:
On the other hand, the Spanish management entities are not required to comply with capital requirements like insurance companies do, but they have to comply with a minimum capital to operate (EUR 600.000), besides a percentage in terms of the volume of assets they manage.
Solvency in DB plans:
- Surplus: Plan assets > mathematical provision formed at the end of the year. In this case, the surplus is allowed to be used for reducing present and future sponsor contributions, increasing the solvency margin, increasing benefits or increasing in the vested rights.
- Deficit : Plan assets < mathematical provision formed at the end of the year. In this case the regulation establishes two mechanisms in order to remove the deficit (it's depends on the rules set in the plan rules):
a. Implementing an amortisation plan: The deficit must be removed at the lastest within 5 years following the date on which the deficit was found. Under authorization of the DGSFP the amortisation plan can be extended for 5 more years.
b. Reducing member's benefits (proportional way).
If the deficit is > 10 %: the hypothesis used in the technical basis must be reviewed.
Defined benefit plans must be actuarially reviewed every three years. An independent actuary who must be different from the one used in the daily operation of the plan must report on the Pension Fund's ability to meet its liabilities.
Pension fund management companies must submit to the supervisory authority at the beginning of each year its annual accounts and the audit report of both the Pension Fund and the management entity, confirming the compliance with existing regulations.
Prior to the year 2018 there was the same management fees for every managed investment that was 1.50%, however this limit was modified introducing three types of limits depending on the type of investment:
• A cap of 0.85% is applied for fixed-income funds, which means a decrease of 65 basic points compared to the previous limit (1.50%);
• A cap of 1.30% for mixed funds, 20 basic points less;
• And 1.50% for equity funds (the same limit as the previous one).
In the case of custody fees the limit has been reduced as well from 0.25% to 0.20%.
The Directorate General for Insurance and Pension Funds may, under certain circumstances, take part in the winding up of a plan in order to protect the interests of members and beneficiaries.
Administrative regime of penalties and breaches exists in case of fraud and mismanagement.
Protection of Assets
Financial and Technical Requirements / Reporting
Standards for service providers
Winding up / Merger and acquisition
Bankruptcy: Insolvency Insurance / Compensation Fund
Disclosure of information / Individual action
Taxation of employee contributions
Taxation of employer contributions
Taxation of investment income
Taxation of benefits
Directorate General for Insurance and Pension Funds: Supervises pension plans, pension funds, insurance companies and pension fund management entities (EGFPs).
The pension legislation defines a set of increments of legal requirements, ranging from minor to major violations, and specifies actions that may be taken by the Directorate General for Insurance and Pension Funds (DGIPF) to correct these increments.
The DGIPF is part of the Ministry of Economy.
Directorate General for Insurance and Pension Funds
Avda. General Perón nº 38, Planta 2ª.
Building "MASTER'S II"
Tel.: (+34) 91 339 70 85
Fax: (+34) 91 339 70 87
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