Pension reform in Spain has become necessary to ensure that the social security system keeps on functioning the way it should and that there is no jeopardy to the public pension pot due to issues with an aging population, declining birth rates and economic challenges.
Recently the country’s Social Security Ministry, unions and the employers’ association signed an agreement to introduce changes to the retirement age and pensions, in order to help balance social security accounts.
In doing this, the government seeks to guarantee that pensions are sufficient and fair and also make sure that the system is sustainable in the long term and benefits both current and future retirees.
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Here are the five changes you need to know about if you work in Spain.
More incentives for delaying retirement age
One of the main parts of this plan is to try and incentivise people to retire later and continue working beyond normal retirement age (currently 66 years and 6 months). There are already benefits in place for those who choose to do this, but the plan is to add even more to encourage more people to delay their retirements.
One of the most important points is that people can continue working and collect a percentage of their pension at the same time. They will be able continue increasing their pension by four percent annually as before, but from the second year of delay, the financial supplement will be increased by two percent every six months.
“Once you receive the award for delaying retirement, you will also be able to move on to active retirement,” explained the Social Security Ministry. Up until now, only 50 percent of pension payments could be collected if you continued working. Now, the percent will drop in the first year to 45 percent, but in the second it will be 55 percent, and will continue to increase by 10 percentage points per year, which can reach up to 100 percent.
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Changes in the contribution of permanent fixed-term contracts
The pension reform agreement includes an improvement to social security contributions for discontinued permanent employees.
From now on their contribution period will be multiplied 1.5 in order to access retirement, permanent disability and widow’s or orphanhood pensions. This means that, for example, 12 months of contributions will be equivalent to 18 months for the purposes of these benefits.
There will also bonus system introduced in contributions for companies that have considerably reduced workplace accidents.
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Changes to partial retirement
Spain’s Social Security Ministry has also explained “that the moment of retirement will be less abrupt and more gradual” as occurs in other EU countries.
It will now be possible to reduce your working hours when you reach retirement age, without your pension being negatively impacted. The reduction in hours can be compensated by what’s known as a relief contract to reflect this.
Access to this benefit has been brought forward by three years (rather than the two it is currently). In the first year, your working day can only be reduced between 20 and 33 percent, but from the second onwards it can be between 25 and 75 percent. Workers who opt for partial retirement will also be allowed to accumulate working hours, if their company agrees.
Those workers in the manufacturing industry who take partial retirement will also see improvements in their social security contributions, which will be maintained until 2029.
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Changes to work leave
Changes to work or sick leave, which had already been agreed upon in 2023, will also be introduced. Primarily this will mean that GPs in the public health service will be able to refer patients who are on sick leave and who must undergo diagnostic tests and rehabilitation, including surgeries, to mutual insurance companies.
The patient’s prior informed consent will be required in order for this to happen. The new agreement clarifies that “discharges, confirmations of discharge and medical discharges will continue to be issued by public health services physicians”.
Early retirement for dangerous, toxic or arduous work
Another of the key points is for those who undertake physically difficult or dangerous jobs, as these workers will now be able to take early retirement without any penalty.
For new sectors that want to be included in this category, there will also be a set of standard requirements, rather than it being agreed upon on a case-by-case basis up until now. Three factors will be taken into consideration – the incidence of sick leave, the incidence of serious events that lead to deaths and permanent disability, and the average duration of the processes.
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