# Pension valuation for Modelo 720.

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**1****Pension valuation for Modelo 720.**

Could somebody point me to a calculator or to the formula for valuing an annuity pension for the 720 declaration please?

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**2****Re: Pension valuation for Modelo 720.**

You have to declare the annuity on the basis on the value at 31 December based on a capitalisation value of the income produced based on the official interest rate of 4%.

Essentially what this calculation does is work out how much money you would need to invest to get an income equivalent to the money paid from your annuity. This results in a surprisingly large figure but this is discounted depending on your age and the value figure for a 65 year old is 24% of the above figure. This increases by 1% for each year less than 65 and decreases by 1% for each year more than 65, so a 75 year old would declare a value of only 14% of the maximum figure.

For example, if you want to make €1 interest from a 4% investment you would need to invest €25. So if the income from your annuity is €10000 you would have to invest €250000. If you are 65 then you only take 24% of this figure which is €60000 so that is today's value of your annuity.

Essentially what this calculation does is work out how much money you would need to invest to get an income equivalent to the money paid from your annuity. This results in a surprisingly large figure but this is discounted depending on your age and the value figure for a 65 year old is 24% of the above figure. This increases by 1% for each year less than 65 and decreases by 1% for each year more than 65, so a 75 year old would declare a value of only 14% of the maximum figure.

For example, if you want to make €1 interest from a 4% investment you would need to invest €25. So if the income from your annuity is €10000 you would have to invest €250000. If you are 65 then you only take 24% of this figure which is €60000 so that is today's value of your annuity.

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**3****Re: Pension valuation for Modelo 720.**

Very clear. Thanks Fred. Where is the interest rate published for each year?

*Last edited by rafikiphoto; Feb 19th 2018 at 11:47 am.*

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**4****Re: Pension valuation for Modelo 720.**

The 4% was the figure used when Form 720 was introduced. It does vary. It is called Interest Legal de Dinero.

There is a table here - as you will see the rate for 2017 is now 3% which affects the example I quoted slightly.

Tabla Anual de Interés Legal del Dinero y de Demora.

or here

https://clientebancario.bde.es/pcb/e...res_legal.html

There is a table here - as you will see the rate for 2017 is now 3% which affects the example I quoted slightly.

Tabla Anual de Interés Legal del Dinero y de Demora.

or here

https://clientebancario.bde.es/pcb/e...res_legal.html

*Last edited by Fred James; Feb 19th 2018 at 12:36 pm.*

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**5****Re: Pension valuation for Modelo 720.**

Thanks again. With your info. it was quite easy to construct a small spreadsheet for use in the future.

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**6****Re: Pension valuation for Modelo 720.**

The variable rate raises an interesting question. When Form 720 first came out, I used 4% and the valuation came in under the 50k threshold. No doubt many people are in the same position, but if the rate goes down, the valuation will go up.

I imagine that once calculated on a fixed annuity, one would assume that the value would not change so the question of ever having to declare it would tend to be ignored.

If the value was close to the threshold, a small rate decrease could kick it over the line!

I imagine that once calculated on a fixed annuity, one would assume that the value would not change so the question of ever having to declare it would tend to be ignored.

If the value was close to the threshold, a small rate decrease could kick it over the line!

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**7**Just Joined

Joined: Mar 2018

Posts: 2

**Re: Pension valuation for Modelo 720.**

Hello!

I'm Swedish and new to this forum.

For the moment I'm trying to do the declaration on form 720, a task I haven't done before. The calculation of a pension you discuss i this thread is this valid for an ordinary pension from the state? If it is, where have you received the information about how to handle it?

I would like to know because I receives monthly pension payments from the Swedish state and don't know if I have to handle it on form 720.

I would be glad if anybody can give me an answer.

/Jan

I'm Swedish and new to this forum.

For the moment I'm trying to do the declaration on form 720, a task I haven't done before. The calculation of a pension you discuss i this thread is this valid for an ordinary pension from the state? If it is, where have you received the information about how to handle it?

I would like to know because I receives monthly pension payments from the Swedish state and don't know if I have to handle it on form 720.

I would be glad if anybody can give me an answer.

/Jan

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**8****Re: Pension valuation for Modelo 720.**

Hi and a warm welcome to the Spanish forum on BE. Myself and Fred James are the moderators for the Spanish forums whilst myself and BEVS moderate Europe. Please read the Site Rules Site Rules | British Expatriate Community adhere to them so that the site runs smoothly. Moderators are there to ensure that the rules of BE are maintained. This is so that members gain the information that they are looking for and find their experiences on the forums to be friendly and worthwhile.

Problems and complaints should always be addressed to a moderator who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are usually friendly and helpful with a wealth of knowledge about the issues of living in Spain. I hope that you enjoy your time participating in the forums.

Please let me know if you need any further help.

Rosemary

Problems and complaints should always be addressed to a moderator who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are usually friendly and helpful with a wealth of knowledge about the issues of living in Spain. I hope that you enjoy your time participating in the forums.

Please let me know if you need any further help.

Rosemary

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**9****Re: Pension valuation for Modelo 720.**

I'm Swedish and new to this forum.

For the moment I'm trying to do the declaration on form 720, a task I haven't done before. The calculation of a pension you discuss i this thread is this valid for an ordinary pension from the state? If it is, where have you received the information about how to handle it?

I would like to know because I receives monthly pension payments from the Swedish state and don't know if I have to handle it on form 720.

I would be glad if anybody can give me an answer.

/Jan

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**10**Just Joined

Joined: Mar 2018

Posts: 2

**Re: Pension valuation for Modelo 720.**

Thanks for your answer.

Do you also know if private pension savings also are treated as income?

I have during several years saved monthly in a pension "account" where there today is a certain amount. The rules for this "account" is that I can't get money from it before the age of 55. When I start receiving money I can't stop it, they will pay me every month. Before the payments start I can choose for how long time they will last, from 5 years and to lifetime. Of course the monthly payments will decrease with longer period. I must receive the money monthly, I can't get all the money directly. I will pay income tax every month for the payments.

Do you think this is something I must declare on form 720?

One more question.

I have a few bank accounts (current and savings accounts) with a total of more than 50.000€. I also have a loan taken in a bank. My opinion is that a loan is an account with negative balance. If I add my negative loan balance to my positive bank balances the total will be lower than 50.000€. Can I then skip this bank account part of form 720?

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**11****Re: Pension valuation for Modelo 720.**

As far as I am aware, personal pension pots are excluded until you start drawing income.

I don’t have a definitive answer about bank loans or overdrafts, but your logic sounds reasonable to net off the loan from other balances.

I don’t have a definitive answer about bank loans or overdrafts, but your logic sounds reasonable to net off the loan from other balances.