by Peter Sanderson
At the end of last year, the Spanish government announced that contributory pensions for 2023 would increase by 8.1%.
This higher-than-normal annual increase was due to double-digit inflation towards the end of last year and was welcomed by the retired population.
Naturally most of these are Spanish, however a small proportion will be expatriates who have worked in Spain and contributed to the social security system.
Very few will have worked all their lives in Spain and most will have moved to Spain at some point in their working lives.
As a result, many will have incomplete contribution records and unfortunately have little knowledge of how the Spanish pension system works and how much pension they can receive against their payments into the Spanish system.
This has been confirmed by the cases reported in the last two issues of the olive press in which expatriates who, having contributed to the system, believe that they are owed something in the form of a retirement pension.
Three basic conditions must be met in order to claim a pension.
First, you must have reached retirement age. Second, she must have paid into the system for a minimum of 15 years. However, if you do not have 15 years paid in Spain but you can show that you have enough years paid in another EU country to reach 15 years, then social security will pay in respect of the years that are on your Spain contribution record.
Third, you have contributed to the system for at least two of the last fifteen years before claiming your pension.
There are two variables that determine the amount of your retirement pension. One is the number of years you have contributed to the social security system.
In 2023 you can retire at age 65 if you have contributed for 37 years and 9 months. However, if your pension record shows fewer years paid, then the retirement age is 66 years and 4 months.
The other variable is the amount paid into the system, most of which is paid by the employer, while the employee pays only a small amount.
In 2023 the maximum pension to be paid is 3,059 euros per month, however the average pension in the country is 1,360 euros per month. It should not be forgotten that these are paid 14 times a year.
As mentioned above, it is necessary to have 15 years paid to receive any pension and the amount to be paid with respect to 15 years is 50%, which is based on the amount entered into the system.
Obviously, the more you have contributed, the more you will receive in the form of a pension.
Starting from the fact that 15 years of contributions give the right to a 50% pension, during the following 49 months the pension increases by 0.21% per month and then the following 209 months it increases by 0.19% per month.
As a result, having contributed 20 years would have a pension of 62.38%, 25 years would give 73.78%, 30 years 85.18% and 35 years would give 96.58%.
For a pension equivalent to 100% in 2023 you would need to be 36 years old and have 6 months of contributions.
In an attempt to improve the sustainability of the Spanish pension system, the government introduced the Pension Reform Bill in 2011. ( Law 27/2011 ) With life expectancy in the 1980s, pensions cost more and more each year. after year.
This bill that came into force in 2013 gradually increased the retirement age from 65 to 67 over a 15-year period between 2013 and 2027.
The government also decided that between 2013 and 2022 the number of years of contributions needed to calculate the amount of the pension would increase progressively from 15 years to 25 years.
At the same time that it increased the retirement age during this 15-year period, the government also increased the number of years of contributions that must be paid in order to receive a pension at age 65.
This is instead of having to wait and claim your pension in the year and month on the sliding scale between 65 and 67 corresponding to the year of your retirement for not having contributed enough.
For example, at the beginning of this sliding scale in 2013, you could have retired at age 65 if you were over 35 years old and had 3 months of contributions.
However, if you had less than 35 years and 3 months of contributions, your retirement age was 65 years and 1 month.
This scale then advanced, increasing each year both the retirement age and the number of years of contribution.
In 2018 you could retire at age 65 if you were 36 years old and had 6 months of contributions. Less than that and you had to retire at 65 years and 6 months.
Similarly, in the current year you can retire at age 65 if you are 37 years old and have 9 months of contributions.
With fewer contributions paid, the retirement age is 66 years and 4 months.
In 2027 and subsequent years you can retire at age 65 if you have 38 years and 6 months of contributions. You retire at age 67 if you do not have this number of paid years.
While the above may sound overly complicated, it is sadly true that pension law is somewhat complicated and continually subject to change as the government struggles with the cost of supporting an increasing number of retirees.