Spanish pension benefits

What sort of spanish state pension can I expect?

UPDATE - some of the rules have changed since this was written.  See Spanish pension benefits 2012 for details. Also, please do not contact Advoco about pension matters.  We are not pensions advisers and cannot provide pension forecasts or give advice on pensions strategy.

Like most people I am not expecting a comfortable retirement with a generous pension paid for by the state.  It seems, whichever country we live in, the retirement age will continue to creep up and the state pension's value will continue to be eroded by inflation or government cut-backs.  Private savings and plenty of them will be needed to secure a decent standard of living in retirement.  But the state pension will be an important component of most people's retirement income so it is worth knowing what to expect and what you can do to get the most out of the system.

Retirement age in Spain

The current retirement age is 65 for both men and women but there is also a minimum retirement age when it is possible to retire on a state pension from 61 years of age but this is only for people who have made thirty years of contributions to at least the minimum level and who have stopped work for no fault of their own and have been registered for six months with the employment office.

This is the situation now but it seems certain to change with the age rising.  The government attempted to bring in a phased move to 67 at the beginning of 2010 but it could not gather sufficient political support to become law.  However given austerity demands to cut the Spanish public sector deficit an increase in the retirement age is still very much on the cards.  A group of 100 economists has issued a report on what needs to be done to save Spanish social security and concluded that, among other things, they need to bring in retirement at 67 and raise the minimum age to 63.  They are also suggesting that workers and the self-employed need to work longer to get the full pension - 40 years of contributions rather than 35 as now.  http://www.cincodias.com/articulo/economia/economistas-piden-elevar-edad-minima-jubilacion-61-63-anos/20101008cdscdieco_2/cdseco/

Finally there is a special measure designed to reduce unemployment where you can retire without penalty at 64 if your job is being taken up by another worker.  So if you are desparate to get on the golf course a year early this is the option for you (jubilacion especial a 64 anos)

Minimum Pension

Anyone retiring without having made the minimum of 15 years of pension contributions will get the bare minimum "welfare" pension which is currently set at 340€ a month (but paid 14 times a year so annually 4,756€ a year).

Contributory Pension

Having paid social security for 15 years (2 of which must have been in the last ten years before retirment) it is possible to claim a contributory pension based on a combination of the amount of years contributions and the amount actually paid, but there is a minimum which is considerably more than the welfare pension: 588€ a month or 8,229€ a year, rising to 10,152€ a year if you are married to someone who has no pension.  Those who have made the maximum contributions can receive up to 35,000€ pa.

Boosting your Spanish state pension

As you get older and closer to retirement it is worth getting to know the way these contributory pensions are calculated if you are paying into the Spanish system, either as an employee paying social security or a self employed "autonomo" paying monthly social security contributions.  This is because the system is always changing and is likely to do so again (e.g. the 15 years may well rise to 20 under current government thinking) so you don't want to be making your plans based on false assumptions.  Also if you understand the different factors which affect the calculation of the pension you can plan accordingly.

There are two key factors:  the number of years paying and the size of the contributions.  The former is quite simple - your pension will be between 50-100% of the maximum for someone who has made your level of contributions depending on the years above 15 years and below 35 years you have been in the system.  It works on a sliding scale of approximately 3% a year so someone who has paid in for 22 years gets 71% of the maximum for their rate of contribution.  You can work beyond 65 to increase this percentage.

The level of pension then depends on your contribution rate - "base de cotizacion".  Most people opt to pay the minimum social security they can e.g an autonomo pays social security at 29.9% of the contribution base which in 2011 is 850€ at its minimum (the one most people choose thus around 254€ a month) but they could pay a base of up to 3230€ and get a much higher pension as a result.  It is something to consider if you know you are going to pay into the Spanish system for 15 years minimum - paying higher contributions  for some of those years could dramatically increase your pension.

 

See also Autonomo classifications Autonomo Social Security Non resident tax / form 210