Spanish Pension Reform Gets Green Light
July 25th, 2011
In December 2009, for the first time, the Spanish Government sheepishly pointed out the need to extend the length of working life in Spain to safeguard the pension system. And last week, after a War of Words lasting 20 months, filled with draft publications, misunderstandings and confusion, Congress finally approved the Law of renovation, adaptation and modernisation of the Social Security System, in other words, the pension reform.
While the final reform includes many amendments, the spirit of the reform remains the same as when it started. The retirement age, at the moment set at 65 years, is to be extended to 67 years. Although transitional arrangements will end in 2027, those who have contributed for at least 38 years and six months may retire at age 65 as before. Meanwhile, the basis for calculating the pension age will be taken on the last 25 years worked rather than 15 years as per the previous legislation.
Cinco Dias reported that the reform will enter into force in 2013, and will be applied gradually. That is to say that it will not significantly affect those who are already on the verge of retirement. Thus, from 2013, those born in 1948 will be able to retire at age 65 and one month. The following year, the retirement age will be 65 years and two months. This gradual increase will continue until 2027, when the official retirement age will be anchored at 67 years. So, those born after 1959 will be affected to the full extent of the pensions reform. However, you will have access to early retirement from the age of 63 with 33 years of contributions, although in some crisis situations the pension age can be lowered to age 61.
Labour Minister, Valeriano Gomez, who took office when the main outlines of the reform were already mapped out, said the Social Security System Modernisation Act does not mean any cutbacks, and that pensions will be higher in 2027. He even went a step further, asserting that from 2040 or 2050, pensions are sure to triple “even though there are 18 million pensioners.”
Other sources indicate that the average pension could be reduced by up to 30% with the new system . With the exception of the CiU (Catalan coalition party), all parliamentary groups refused to support the ruling.
Gomez said that the new rule is expected to extend rights and reminded that the regulations includes that women who have interrupted their careers to care for their children can collect up to five years of contributions. On the other hand, the final rule considers that disabled people can retire earlier with 25 years of contributions. Despite the rejection of the main opposition party, the Labour Minister was confident that the PP, if elected, will not rescind the reform.
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