New incentive plan
The reform, crafted under Minister José Luis Escrivá, aims to safeguard the country’s future pension sustainability. It signals a shift in how labor markets and pension systems interact, proposing incentives rather than abrupt changes in retirement policy. The government argued there was no need to raise the legal retirement age. Instead, it favors rewards for workers who choose to extend their careers, so contributions continue longer and pension checks arrive later for a shorter period.
In practice, the approach centers on carrots rather than sticks. One option is the possibility to receive a single lump-sum payment, a kind of check, for employees who decide to push back retirement by at least 12 months.
For those who have taken this option, the typical check amounts to around €20,511, based on Social Security data. The final figure can swing widely depending on the starting pension, the years contributed, and the length of time chosen to delay retirement.
With those three variables in play, the minimum check is roughly €5,000 per year of delay, while the maximum can approach €12,500 per year. The average settled at €20,511 in the first five months of 2023.
Delay methods and early outcomes
The reform includes several incentive options within the pension system and was agreed upon by the government, employers, and unions in late summer of 2021.
Since then, incentives to delay retirement have been put in place. In the first five months of 2023, the number of workers choosing to postpone retirement increased by about 100 percent compared with the same period in 2022, according to Social Security data. When compared with the first five months of 2019, the increase reaches around 62 percent.
Critics argued that these measures mostly benefited higher-paid workers who can more easily extend their careers. Those in physically demanding roles, or working in less favorable health or wage conditions, are less likely to delay retirement. Conversely, higher-earning self-employed professionals such as senior lawyers, university professors, or surgeons often have more opportunities to access these checks or later pensions.
Growing delays and longer careers
From January to May of this year, Spain counted 137,049 people delaying retirement. Of that total, 11,075 were postponing retirement by more than the standard period, representing 8.1 percent.
A year earlier, while reform was still in progress and retirement figures were similar, the number of workers delaying retirement stood at 7,649 (5.5 percent). The year-over-year rise was about 45 percent.
Among the 11,075 delaying retirement by May, 5,383 did so for at least 12 months. That figure is three times the number who postponed for more than a year in 2022, indicating a broader trend toward longer deferrals and more frequent postponements.
In short, more workers are choosing to delay retirement, and more are doing so for longer periods. The legal retirement age sits at 66 and a half, but the effective age hovers around 64.8 years. The reforms aim to narrow this gap by encouraging longer work lives, with Social Security seeking to boost revenues and ease pressures from an aging population.
Three incentive options
The reform provides three ways to extend the retirement age in exchange for that extension.
The first option is a lump-sum payment (a check) calculated from the starting pension, the number of years contributed, and the length of the postponement.
The second option increases the pension by 4 percent for each year of delay. Pre-reform this rise stood at 2 percent. While this approach could offer a longer-term gain, it removes the immediate liquidity of the check.
The third option combines elements of the first two: a check plus a modest increase in the future pension.
Latest SSI data show that roughly one in three workers who delay retirement by 12 months or more opts to cash the check, choosing the first formula.
Penalties for early retirement
The carrot of delaying retirement sits alongside a stick in Escrivá’s system. The reform introduces penalties for those who choose to retire early, reducing future pension benefits. The penalties target especially the initial months of retirement and take effect early, even as rewards for longer working lives are in play.
In 2024, penalties for early retirement began to apply more broadly. In 2021, when the reform was announced, a large share of retirees left work before the age of majority due to fear of penalties. That share began to decline a year later but remained notable, with marked decreases for those considering retirement two years early, the maximum allowed by law.
Alongside the incentives, the reform ties certain conditions to labor-market policies. When a worker lacks the required minimum contribution period to retire, that retirement status can be denied. The measures are also connected to transitions involving indefinite employment contracts and efforts to promote female participation in traditionally male-dominated sectors.