23 Jan, 2023 @ 18:30
3 mins read

Experienced expat accountant: How to navigate Spanish pensions, social security

Woman ordered to pay back dead brother's pension that she claimed for 24 years in Spain's Valencia region
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By Peter Sanderson

At the end of last year the Spanish government announced that the 2023 contributory pensions would be increased by 8.1%.

This larger than normal annual increase was as a result of inflation being in double figures towards the end of last year and was well received 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 life in Spain and most will have moved to Spain some time during their working life.

As a result many will have an incomplete contribution record and unfortunately will have little knowledge as to how the Spanish pension system functions and how much pension they can receive in respect of their payments to the Spanish system.

This has been borne out by the cases set out in the last two issues of the Olive Press in which expatriates who, having paid into the system, believe that they must be due something in the form of a retirement pension.

Three basic conditions have to be met in order to be able to apply for a pension.

Firstly you have to have reached retirement age. Secondly you have to have paid into the system for a minimum of 15 years. However if you do not have 15 years paid up in Spain but can show that you have enough years paid up in another EU country in order to reach 15 years, then the social security will pay out in respect of the years that are on your Spanish contribution record.

Thirdly you have paid into the system in respect of at least two years in the last fifteen before claiming your pension.

There are two variables which determine the amount of your retirement pension. One is the number of years that you have paid into the social security system.

In 2023 you can retire at 65 years of age if you have paid contributions for 37 years and 9 months. However if your pension record shows fewer years paid up then the retirement age is 66 years and 4 months.

The other variable is the amount paid into the system with most of this being paid by the employer while the employee pays only a small amount.

In 2023 the maximum pension payable 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 up in order to receive any pension and the amount payable in respect of 15 years is 50% which is based on the amount paid into the system.

Obviously the more you have paid in, the more you will receive in the form of a pension.

Following on from the fact that 15 years paid up gives the right to a 50% pension, for the next 49 months the pension increases by 0,21% per month and then the next 209 months it increases by 0,19% per month.

As a result having paid for 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 have 36 years and 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 then into the 80s pensions were costing ever more year after year.

This bill which came into effect in 2013 increased gradually 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 necessary in order to calculate the amount of the pension would increase progressively from 15 years to 25 years.

At the same time as raising the pension age during this 15 year period the government also increased the number of years of contributions that have to be paid so as to be able to receive a pension at the age of 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 relating to the year of your retirement due to not having paid enough contributions.

For example at the beginning of this sliding scale in 2013 you could have retired at 65 if you had more than 35 years and 3 months paid up.

However if you had fewer than 35 years and 3 months of contributions your retirement age was 65 years and 1 month.

This scale then moved forward with both the pension age and the number of years of contributions increasing every year.

In 2018 you could retire at 65 years of age if you had 36 years and 6 months paid up. Less than that and you had to retire at 65 years and 6 months.

Similarly in the current year you can retire at 65 if you have 37 years and 9 months of contributions.

With fewer contributions paid up the retirement age is 66 years and 4 months.

In 2027 and subsequent years you can retire at 65 if you have 38 years and 6 months paid up. You retire at 67 years of age if you do not have this number of years paid up.

While the above may appear to be unduly complicated it is unfortunately true that pension legislation is somewhat involved and is continually subject to change as the government struggles with the cost of supporting an ever increasing number of pensioners.


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