Pension Changes in Spain 

The Spanish government has approved new legislation related to the social security that will have several different effects, although the most notable will be with regard to the retirement age.

The law is destined to switch from a mandatory to a flexible retirement age, as well as to increase the relation between the amounts contributed during working life with what will be received as a pension.

This reform in the social security will be enforced as from the 1^st of January 2013 and will be progressively introduced during a transitory period of 15 years that will end in 2027.  Starting in 2027, every 5 years the parameters related to the scheme will be revised according to the estimated average life expectancy for people of 67 years of age.

Retirement

The standard retirement age will increase gradually from 65 to 67 during a period of 15 years ending in 2027.

After 2027 it will be still possible to retire at 65 with a full pension if the contribution period is of at least 38 years and 6 months. It will be possible to retire at 65 even if this period is not reached, but a reduction coefficient will be applied.

Minimal contribution period and base pension

The minimum contribution time in order to receive a pension will remain at 15 years.  Presently the base pension is calculated on the contributions of the last 15 years. From 2013 to 2027 the calculation will be gradually extended to the contributions of the last 25 years.

To calculate the pension, the system will evolve to become completely proportional. For the first 15 years of contribution the pensioners will receive 50% of the base pension. Starting from the 16th year of contributions for every additional month between month 1 and 248, 0.19% of the base pension will be added. For every additional month between month 249 and 264, 0.18% will be added.

To reach the full 100% of pension the contribution base will have to be 37 years. The transition from the present 35 years contribution base will be progressive between 2013 and 2027.

Late retirement age

In order to promote a voluntary increase of the retirement age an increase in pension between 2% and 4% will be added for each year on top of the pensionable age in function of the total period contributed.

Early retirement

Two types of early retirement will be considered: Voluntary and by force majeure. In both cases, for early retirement to be possible, a minimal contribution period of 33 years will be required. The pension will decrease by 1.875% per quarter for workers with less than 38 years and 6 months of contributions and by 1.625% per quarter for workers with more than 38 years and 6 months of contributions.

The requirement for force majeure early retirement will be:

• To be at least 61 years old
• To be inscribed as a job seeker in the unemployment office.
• To be fired for reasons not attributable to the person in a situation of company crisis.

The present early retirement at 61 linked to the hiring of a new employee will still be available to companies. Nevertheless there will be an increase in contributions for the company related to the new worker in order to decrease the impact on the Social Security.

Special cases

When having a child implies a career interruption, there will be an additional 9 months of contributions per child, with a maximum period of two years. This period will not exceed the real period out of work. This benefit will be granted to only one parent. In case of dispute between parents the benefit will be granted to the mother.

Employees with jobs requiring great physical exertion, regular contact with toxic agents or dangerous or unsanitary conditions, will benefit from reductions in the minimal pensionable age.

Those4 participating in Internships and scholarship programmes that have the right to social security will be granted extra contribution time. This will only be given once and for a maximum of two years.

Exceptions

The old retirement and pension regulations will be applied to:

• Those terminating their last employment before the 25^th of March 2011.
• Those accessing the partial pension status before the 25^th of March 2011.
• Those terminating their last job as a consequence of a collective employment agreement or a collective company agreement signed before the 25^th of March 2011 and regardless of whether the job finalises before the 1^st of January 2013.

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